CAG calls for action against those responsible for lapses

Post-bid/ post-award changes to the terms and conditions of some of the ports undertaken in Public-Private Partnership mode resulted in undue favour to the private developers and were against the financial interests of the Andhra Pradesh government.

Changes were made to the Concession Agreement to alter its basic structure, thereby vitiating the sanctity of the bidding and contracting process.

This was stated in the report of the Comptroller and Auditor General of India on Economic Sector for the year ended March 2012, which was placed in the Assembly on Friday.

In its audit findings, the report said there were deficiencies in the competitive bidding process for selection of developers in Gangavaram and Kakinada Deep Water Port, reflecting adversely on fairness and transparency in selection.

In respect of the Machilipatnam port and Vanpic Port Project, similar issues were reported earlier in the CAG’s audit report for 2008-09 and on land allotment in the report for 2010-11.

Giving an overview, it noted that the economic sector of the State Government accounted for Rs. 30,045.16 crore of expenditure in 2011-12. Of this, the maximum expenditure was by the Irrigation & Command Area Development Department ( Rs.17,787.39 crore), followed by the Energy department (Rs. 4,367.68 crore) and the Agriculture & Cooperation Department ( Rs.3,334.54 crore).

Among others, it mentioned that the State government irregularly permitted or allowed change in the shareholding pattern of the development consortium and /or port operator in three ports (Krishnapatnam, Gangavaram and Machilipatnam).

There were also deficiencies/ deviations in revenue sharing and financial arrangements.

Land allotment

A key aspect of ports development through PPP mode has been the allotment of large amounts of land to these ports, also facilitating mortgaging of such lands by private developers to banks and other lending institutions for obtaining huge loans for project development, leaving little risk or exposure on the part of the private parties.

The report said that multiplicity of non-major ports along the coastline, along with liberal grant of exclusive rights over large lengths of the coastline (well beyond port limits) has virtually rendered the majority of the State’s coastline privatised.

The CAG recommended setting up a Maritime board to regulate the functioning of the privatised ports as well as minor ports under Government’s control. It also suggested seeking legal advice to the extent to which it would be feasible for the State Government to withdraw and /or curtail post-bid concessions/favours granted to the successful bidders.

The report said action should be initiated against the persons responsible for irregularities and deficiencies pointed out in audit scrutiny.


Is Masula port a jinxed project?November 20, 2013