Odious Debts Online
February 21, 2006

The Comptroller and Auditor General of India (CAG) has uncovered serious deviations in a power contract awarded to Canadian construction firm SNC Lavalin in 1996.

In a report released last week, CAG indicted India’s previous Left Democratic Front (LDF) government for the award of an Rs3.745bn ($84.5 million) contract to Lavalin for the renovation of three hydro electric projects in Kerala.

The CAG report found that former ministers belonging to both the LDF and the Communist Party of India-Marxist (CPI-M), during their former tenures in power, are implicated in the scandal.

CAG claims that the cost of the hydro projects were in excess of Rs 316.75 crore, based on the norms prescribed by the Central Board of Irrigation and Power (CBIP) for the renovation and modernisation of hydro power stations.

CAG also found that the state of Kerala did not receive monies promised from a grant of Rs 98.30 crore Lavalin had agreed to provide for the establishment of a cancer center as part of the controversial deal.

According to The Hindu newspaper, the CAG report revealed that Lavalin was “only a consultant intermediary” for the projects and “not the original equipment manufacturer” and that “the supply of goods and services was made by other firms at much higher cost leading to excess expenditure”.

CAG alleges “the absence of due professional care in negotiating the foreign loan” with Lavalin “proved to be detrimental to the financial interests” of the CBIP and that the Board was unable to ensure the quality of the renovation work.

The CAG report comes just three months ahead of assembly elections in five Indian states, and is predicted to snowball into a campaign theme for the Congress-led United Democratic Front (UDF), which is alleging irregularities and corruption by the CPI-M in the deal.

Meanwhile, the CPI-M state secretariat has accused the UDF leadership of having falsified facts relating to the Lavalin contract and said that if an inquiry was held the UDF would have more to answer for.