CAG finds irregularities in Odisha port projects

Audit reveals loss of Rs 160 crore for minor ports in PPP mode

By Sayantan Bera
Published: Wednesday 19 December 2012

The Comptroller and Auditor General’s (CAG's) performance audit of port projects in Odisha has revealed major irregularities. While reviewing five minor port projects under the public private partnership (PPP) mode—Astaranga, Chudamani, Dhamra, Gopalpur and Subarnarekha—the CAG report noticed several deficiencies. The state government took up the projects between 1998 and 2012 with a projected private sector investment of Rs 12,594 crore.

The report submitted to the state assembly on September 16 notes “several deficiencies in policy formulation, implementation, institutional arrangements, design and enforcement of concession agreements.” The state government suffered a loss of Rs 159.96 crore due to deficiencies in the concession agreement.

CAG observes that projects were largely awarded through the memorandum of understanding (MoU) route instead of competitive bidding. Key partners of the consortium were allowed to exit during the lock-in period. Undue benefit of longer concession periods were allowed to the private parties. This is in violation of what is prescribed in the model concession agreement (MCA), formulated by the Planning Commission. 


“Concession period of three ports were allowed to be 34 years against the recommended 30 years in MCA, and that too without analysing the investment proposed to be made, volume of traffic trend projections, fixed and operation and maintenance costs, revenue inflow and outflow streams, return on investments, the Government share of revenue, expected breakeven period etc,” says the audit report. This resulted in extension of undue benefit to the developers, as handing over of the port would be delayed by four years and the developer would reap the benefit for this period, it adds.

“Contrary to the provisions of Concession Agreement, major partners exited during the lock-in period, selling their shares to other partners and other companies. Neither were independent engineers engaged to oversee drawing and design as well as quality parameters nor financial and operational auditors were engaged by the Government to validate the gross revenue generated and Government’s revenue share calculated by the Port authorities,” the report observes.

While excess land was allotted beyond requirement for Dhamra port, environment issues like setting up of environment cell and green belt were not enforced. Monitoring of execution of the projects by the commerce and transport department was found to be virtually non-existent. Out of the five projects, only in case of Gopalpur, a private promoter was selected through competitive bidding. However, the developer had no experience in the infrastructure sector and revenue sharing was accepted at 0 to 7.5 per cent, below the reserve percentage of 5 to 8 per cent.

CAG has recommended immediate constitution of an Odisha maritime board to plan, direct and implement maritime development in the state with private sector participation. Among its other recommendations are returning excess land beyond requirement to the government, incorporating the advice of law department in selection of private partner and an institutional mechanism for monitoring to safeguard the interests of the state.


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