Says the Rs.374.5-crore contract did not improve power generation

The Central Bureau of Investigation (CBI) told its special court here on Thursday that the State government’s allegedly exorbitant Rs.374.5-crore contract with Canadian firm SNC-Lavalin to renovate the Pallivasal, Sengulam, and Panniyar (PSP) hydroelectric projects during 1998-99, in reciprocation for a purported Rs.100-crore grant to establish a cancer hospital at Thalassery in Kannur district, yielded “no improvement in power generation.”

Opposing the discharge pleas of the accused in what has come to be known as SNC-Lavalin corruption case, notably that of the then Power Minister and present Communist Party of India (Marxist) State secretary Pinarayi Vijayan, the 7th accused in the case, the CBI said it had carried out its own technical investigation with the help of experts from the Central Power Research Institute (CPRI), a valued public utility consultant in the field of renovation, maintenance, and up-gradation of power projects.

Panel findings

The CPRI told the CBI that the findings of the E. Balanandan Committee, which recommended that only essential components of the three projects be replaced and ruled out total substitution of power generation equipment, were “true, realistic, and portrayed the correct picture.”

The report should have been considered before striking the contract with SNC-Lavalin, allegedly in contravention of repeated Central government directions, since 1993, to follow the process of competitive bidding in the implementation of power projects to ensure transparency and fair play in such deals.

The CPRI, which conducted a comparative study of similar projects executed during the same period, concluded that the per megawatt production cost (Rs.3.8 crore) was the highest for the PSP projects, though there was no change in power generation.

Special Judge R. Reghu asked the CBI what the purpose of the contract was. “Is it intended to generate more power or achieve already installed capacity,” he asked.

Cheaper options

The CBI said that the CPRI experts had stated that Bharat Heavy Electricals Limited (BHEL) could have executed the PSP renovation projects at a much lesser Rs.123.73 crore. The Comptroller and Auditor General (CAG) said the Rs.374.5 crore spent on renovating the projects had “not served any purpose.”

The State government had availed itself of a loan of Rs.159.95 crore from the Export Development Corporation, a Canadian entity, at an interest rate of 18.6 per cent when the Power Finance Corporation would have given the same amount at 6.8 per cent interest, the CBI said.

The Union Finance Ministry’s advice to the State government not to stand guarantee to the foreign loan was ignored. (It meant that if the Kerala State Electricity Board defaulted on the loan, the State would have to pay it. Moreover, only the Central government could stand as a guarantor for foreign loans.) However, the Cabinet decided that the State government could stand as guarantor for the foreign loan through a consortium including the State Bank of India “in view of the urgency of the matter,” overruling the objection of the State Finance Ministry.

The court will hear the arguments on the discharge plea again on October 11.

More In: Kerala | National