CAG finds large-scale irregularities in Orissa port sector

Written by fe Bureau | Bhubaneswar | Updated: Dec 17 2012, 06:24am hrs
The Comptroller & Auditor General of India (CAG) on Saturday censured the Orissa government for large-scale irregularities in awarding port sites to private developers on public-private partnership (PPP) basis.

The CAG has pointed out that the government awarded the sites through MoU route instead of International Competitive Bidding (ICB) route and allowed the developers to exit the port project during the lock-in period in violation of the Concession Agreement.

The Orissa government took up five minor port projects (Dhamra, Gopalpur, Subarnarekha, Chudamani and Astaranga) for development through PPP mode during 1999-2012, with a projected private sector investment of R12,594.02 crore. While the Dhamra Port is being developed jointly by Tata Steel and L &T, the Gopalpur Port is being promoted by a consortium led by Orissa Stevedores (OSL), the Subarnarekha port by Creative Port Developer (CPDP) and the Astaranga by Navayuga Group. Chudamani port is being developed by Essel Mining & Industries, a Aditya Birla Group Company, as captive port.

The CAG conducted the Performance Audit of Resources and Revenue sharing arrangements in PPP model port projects in the state covering the period 1997-98 to 2011-12.

The report, which was laid in the Orissa Assembly on Saturday, said that several deficiencies were found in policy formulation, implementation, institutional arrangements, design and enforcement of the CA and revenue sharing model.

Though four out of five projects, with project cost of each exceeding R500 crore were taken up and CAs were executed, yet approval of the High Level Clearance Authority was not obtained, that too when private promoters were selected in three cases through MoU route, the report said. Though, it added, out of five projects, where one (Gopalpur) private promoter was selected on competitive bidding route, the developer had no experience in infrastructure sector.

The port policy permits adoption of ICB route or MoU route for selection of private developers. However, the views of law department to go for competitive bidding as the same would be legally tenable and would ensure maximum participation and fair selection process was ruled against, the report pointed out.

Asserting that the provision of CA has been violated in allowing major partners exiting the project during the lock-in period, the report said major partners in Subarnarekha port and Gopalpur port left the project before they become operational. Major partners like SREI Venture Captial and Noble Resources left the Subarnarekha port and Gopalpur port, respectively, the report said.

The provision of high concession period of 34 years and the delay in project execution has benefited the private port developers at the cost of the state exchequer, the report said, adding, the government suffered a loss of R159.96 crore due to deficiencies in the CA.

Concession period of three ports were allowed to be 34 years against the recommended 30 yers in Model Concession Agreement. This resulted in extension of undue benefit to the developers, as handing over of the port would be delayed by four years and the developer would reap the benefit for this period, observed the CAG report.