CAG files adverse report on PPP projects


Violations found in Mumbai airport and several railway projects

The Comptroller and Auditor-General of India (CAG) has picked holes in the way the Public Private Partnership (PPP) was handled in two vital infrastructure sectors during the tenure of the previous government.

The CAG’s adverse comments on the Mumbai airport and several Railways projects come at a time when the National Democratic Alliance Government is pinning its hopes of using the PPP route to build infrastructure in several sectors.

Three of the Railways projects were in Gujarat and mostly faulted on procedural grounds.

They include a railway line to a port, something that new Railway Minister D. V. Sadananda Gowda hopes to promote in a big way to solve the ‘last mile problem’.

During his speech on the railway project, Mr. Gowda expressed the hope that all future projects would be based on the PPP model including bullet trains.

In case of the Mumbai airport, the CAG has asked the government to review the operator’s performance because when project cost had doubled, the gap was filled by asking passengers to shell out a development cess.

The CAG made several adverse comments about the PPP model for the airport. They include risks not being properly transferred leading to others shouldering the extra cost of nearly Rs. 5,000 crore and the Civil Aviation Ministry being liberal with extensions to the project by a GVK Group-led consortium.

On the other hand, the revenue share of another consortium member — the public sector Airports Authority of India (AAI) — was “set to decline with the outsourcing of activities as noticed in the case of domestic and international cargo activities and the Airport Hotel project.”

Rules violated

A CAG report on the Railways tabled in Parliament on Friday, said it had violated rules while selecting private players. Also, the Railways did not formulate any model agreement for execution of the projects within the time frame nor did it adopt the model prescribed by the Planning Commission for PPP projects.

The Railways had based all subsequent projects on the first PPP project — Pipavav Rail Corporation Limited (PRCL) — which itself was based on shaky foundations. The shareholders agreement was incomplete as it was executed before finalisation of the stake and the way in which debt was to be recovered was unspecified. In the case of the Viramgam-Mahesana gauge conversion, the Finance Ministry approval was not taken for payment of an access charge.

The Railways fared badly with the Kutch Railway Company Limited project too as it failed to secure minimum traffic guarantee though the project was conceived at the expressed interest of the stakeholders. “Further under utilisation of the shortest route (Gandhinagar-Palanpur) resulted in avoidable loss on account of haulage charges,” the report said.

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Printable version | Jan 19, 2020 9:18:59 PM |

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