CAG raps Puducherry government for Karaikal port project lapses

The Comptroller and Auditor-General (CAG) has pulled up the Puducherry government for serious lapses and irregularities in the implementation of the Karaikal port development project in the public-private partnership mode.

In a report tabled in the Assembly on Tuesday, the CAG brought out several flaws in the procedures followed, beginning with the selection of the concessionaire, the fixation of the concession fee and the government’s revenue share after awarding the work, “which defeated the very purpose of competitive bidding,” and in the operation of the escrow account for transfer of revenue payable to the government.

The audit, which covered a five-year period between 2009 and 2013, was undertaken “to check whether the selection of the concessionaire was fair and transparent, port development was undertaken as per the terms of the Concessionaire Agreement (CA) and the required monitoring mechanism was in place to safeguard the interests of the government.”

The CAG said the selection of the concessionaire was done without the two-stage process as prescribed in the General Financial Rules. Further, the government selected the concessionaire without analysing any financial and technical parameters and ascertaining its own share of revenue from the project, “a pre-requisite for awarding any contract on a competitive basis.”

On the government’s failure to incorporate safeguards in the CA, the CAG said that following the Pollution Control Board’s refusal to clear Phase 2A expansion of the port, and as it would not be until 2015 when the sufficient power supply would be available for the mechanised conveyor system, the Karaikal Port, which had been running on profit till March 2012, sustained a loss of Rs. 28.86 crore during 2012-13.

The government, though the public partner with the liability to bear the outstanding debt in the event of default by the concessionaire, was not consulted during the entire process. By firming up the CA on the estimated cost of Phase 1 and not informing the government of the further cost, the concessionaire incurred an expenditure of Rs. 2,236.54 crore till date, the report said. Moreover, the appointment by the government as an expert of a person serving as an adviser to the concessionaire defeated the very purpose of such an arrangement, because of the possible conflict of interest, the CAG said.