The Comptroller and Auditor General of India has pulled up the Electronics Corporation of Tamil Nadu (ELCOT) for extending undue benefit of Rs. 37.80 crore to two IT companies in the allotment of land in Sholinganallur.

Insufficient tenders

The CAG's transaction audit observed that contravening an order of its Board of Directors in 2006 cancelling insufficient tenders by the three bidders – Cognizant Technology Solutions, Sutherland Global Services and Sify – for a plot on 80 acres of land offered on a 90-year lease, ELCOT had renegotiated with the bidders and revealed its “acceptable price” of Rs. 3.27 crore per acre against the upset price of Rs. 5 crore per acre. Consequently, the same bidders participated in a second open tender that was stipulated by the Government and quoted the price disclosed to them.

“Thus the objective of calling fresh tender for obtaining competitive price was negated and the disclosure of reserve price of land enabled the bidders to form a cartel,” the CAG said.

After accounting for the sharp rise in land value at Sholinganallur, the audit stated that had ELCOT leased its land at a rate on par with the revised guideline value of the abutting residential area, it could have earned an additional revenue of Rs. 37.80 crore.

The report also noted that though the two IT companies, Cognizant and Sutherland (Sify opted out later), had not fulfilled their obligations as per tender conditions that they would commence construction of IT complex within two years, ELCOT allowed such violation without repossession of the land as stipulated in the tender conditions, the CAG said.

According to the CAG, the matter has been reported to Government and ELCOT in May 2011 and replies were awaited.