CAG report flags irregularity by NHAI

CAG in the report also said that NHAI failed to levy penalty upon the Concessionaires applying for such renegotiation…reports Asian Lite News

In its compliance audit report on ‘Rationalisation/Deferment of Premium in BOT Projects in NHAI’, the CAG noted that the National Highways Authority of India (NHAI) extended undue benefit to concessionaires.

National Highways were being developed under different mode of execution including Built Operate & Transfer (BOT) (Toll), Built Operate & Transfer (BOT) (Annuity) and Engineering, Procurement & Construction (EPC) Mode.

“NHAI extended undue benefit to concessionaires by resorting to post-tender amendments. The premium payable by the concessionaire was laid down in a legal contract drawn up after an open bidding process, in which premium offered was the one and only parameter in deciding upon the financial bids (request for proposal). Any post tender/ contract amendment tantamounts to vitiating the entire tendering process, against the principle of sanctity of contracts and unfair with respect to other bidders,” said the report which was tabled in the Parliament on Thursday.

The CAG report noted that the scheme was formulated on the basis of flawed presumptions. While proposing the Cabinet note, a list of 23 projects, which were awarded on premium but whose Appointed Date was yet to be declared, was annexed and the status of languishing projects, along with need for policy for revival of these projects, was highlighted in the background of the Cabinet Note. Finally, Option C which proposed rescheduling of premium in respect of all stressed projects was approved.

“However, none of these listed projects availed the scheme. Out of the 23 projects, which formed the basis for inception of this policy, 18 projects could not take off and were subsequently terminated/ foreclosed while the remaining five projects, though started, were not completed till December 2019,” said the report.

The CAG report noted that the policy or scheme for rationalisation of premium was neither considered nor approved in the NHAI Board Meeting and MoRTH (ministry of road transport and highways) failed to adhere to guidelines of the Cabinet Secretariat for circulation/approval of Cabinet Notes

“There were huge variations in total project cost of NHAI vis-a-vis Concessionaire’s total project cost resulting in high debt servicing. The direct implication of this higher debt servicing is on the subsistence revenue of Concessionaire, which in turn had direct relation with premium deferred,” said the report.

CAG in the report also said that NHAI failed to levy penalty upon the Concessionaires applying for such renegotiation.

“This was to compensate for the special benefit that was being provided to the Concessionaires beyond the signed agreement. In a way, this was to mitigate the moral hazard of reopening a signed agreement to bail out the sector. This resulted in loss of Rs 51.01 crore to NHAI and undue favour to the concessionaires,” said the report.

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