The Central Vigilance Commission (CVC) has found serious deficiencies in three multi-crore contracts awarded by the Dedicated Freight Corridor Corporation of India Limited (DFCCIL).

The CVC conducted an intensive examination of the contracts in April-May and on detecting major deficiencies wrote to the Railway Board Chairman, seeking immediate action to set things right.

The CVC found that the DFCCIL Board delegated full powers to the Managing Director to conduct negotiations and accept tenders without an upper ceiling. “High value contracts are being awarded by the MD without holding board meetings. The progress of works inspected is negligible as compared to the construction schedule, but no action is being taken by the organisation,'' the CVC noted in its report, which has been accessed by TheHindu.

The three contracts that came under the CVC scanner are: construction of 54 major bridges on the Surat-Mumbai corridor at a cost of Rs. 419 crores; construction of a new rail line of about 105 km on the Mughal sarai-Sone Nagar section in which the consultant's estimate was revised from Rs.568 crore to Rs. 665 crore and which was awarded at Rs.781 crore without quantifying assessment for reasonableness of rates; and the Rs. 133 crore contract for general consultancy services for the Bhaupr-Mandrak section of about 300 route km for electrification, signalling and telecom system.

The CVC report gives enough indication that financial irregularities and flaws may well turn out to be a biggest scam in a single department of the Railways.

Conceived as a special purpose vehicle (SPV) to execute the ambitious dedicated freight corridor project in October 2006, the DFCCIL management was chosen from among retiring senior railway officials as a special case. This was also commented upon by the CVC, which said the decision to appoint “retiring railway officials as directors and managing director may be revisited by the Ministry of Railways.''

Dubbed as a pet infrastructure project of Prime Minister Manmohan Singh, dedicated freight corridors, when built and made operational, will link India's busiest freight rail tracks across the length and breadth of the country. It will not only increase the Railways' revenue, but also help it in running ultra superfast passenger trains like Japan's bullet trains, which will cut down travel time substantially.

On the tender for construction of 54 major bridges, the report said that tender documents for this lump sum contract has “ambiguities and infructuous variation clauses,'' which have been interpreted in favour of L1, the lowest bidder. It apprehended that faulty negotiations and post tender modification would raise the final cost by several hundred crores of rupees.

The CVC also found that despite a Rs. 200 crore increase in cost, projected by the contractor and approved by the DFCCIL, only 2 per cent of the work has been finished till date.

The manner of functioning of the DFCCIL had caused concern to the Planning Commission Deputy Chairman Montek Singh Ahluwalia in March and he wrote to Railway Minister Mamata Banerjee. “Given the exceptionally large financial implications [about Rs. 80,000 crore] of this project on the Railways' budget, it would be desirable to have the Financial Commissioner on its [DFCCIL] Board. It would also be useful to appoint some independent directors to lend greater quality to the deliberations of the Board,'' Mr. Ahluwalia had suggested.

Ms. Banerjee herself expressed serious concern over the slow progress of the prestigious project. “Dedicated freight corridor is our Prime Minister's dream project. I am concerned about the pace of progress,'' she said in her speech in the Lok Sabha while presenting the railway Budget 2010-11 in February.

Last month, the Prime Minister's Office (PMO) conducted a review of the progress made so far by the project.

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