CAG raps Gujarat govt for 'undue benefits' to Reliance Petroleum, Essar Power

Written by Avinash Nair | Gandhinagar | Updated: Jul 26 2014, 18:14pm hrs
CAGThe agency also pulled up GMB for going soft on companies like ABG Shipyard Ltd.
The country's audit watch-dog, the Comptroller and Auditor General of India (CAG) has rapped the Gujarat government for "extending undue benefits" to private companies like Reliance Petroleum Limited (RPL) and Essar Power, and for going soft on few others like ABG Shipyard Ltd that have operations in the port and power sectors in the state.

"Due to non-fixation of time limit in the Port Policy and BOOT Principles and due to deficient planning, the important commitments made in the policies were not implemented even after a lapse of more than 15 years since the declaration of the policies," stated CAG coming down heavily on the state government's port policies in the "Economic Sector" report, that was one of the five CAG reports tabled on Friday--- the last day of the on-going session of the state legislative assembly.

"Though the port policy envisaged private jetties as an interim arragement till new ports become operational, it was observed that 16 agreements for private jetties were entered for period ranging from 5-25 years between May 1995 and April 2011. It was also noticed that as against the 10 ports to be developed with joint/private sector under the Port Policy, three ports --- Dahej, Mundra and Hazira ---- were developed up to March 2013," the report added stating the the state's port policy "did not envisage any time limit for development for private ports."

"Undue benefit was extended to RPL by non-recovery of full wharfage rate after the cost of captive jetty (Rs 362 crore) constructed by it, was set-off. Further,erroneous calculation of set-off value and application or incorrect wharfage rate resulted in short recovery of Rs 649 crore from RPL," stated CAG pulling up the state-run Gujarat Maritime Board (GMB), the nodal agency for administration, control and management of 40-odd minor ports in Gujarat.

The agency also pulled up GMB for going soft on companies like ABG Shipyard Ltd which was handed over 2.68 lakh square meters of land in Bharuch district for a ship building yard. "Lease rent to the tune of Rs 2.10 crore remained outstanding (June 2013) and was not paid in spite of issuance of reminders by GMB to ABG. However, GMB did not take any action to suspend the operation of shipbuilding facility of ABG as per the terms of the agreement," the report added.

CAG also points out that state's nodal agency for ports and shipping failed to invoke contract provisions against defaulting contractors like Mumbai-based Neptune Marine Private Ltd and M/s. SHM Shipcare. GMB had entered into an agreement with both these companies to purchase a tug costing Rs 1.59 crore and a Hovercraft costing Rs 6.30 crore respectively. "The inaction led to blocking up of funds and potential revenue loss," the audit stated.

CAG was particularly harsh on the manner GMB functioned. "No system for timely verification of construction cost of assets and monitoring the activities of private developers is in place. The penal provisions for violation by developer were ineffective. The internal control and monitoring system was deficient," the report added.

Meanwhile, in its report on Gujarat's Public Sector Undertakings (PSUs), CAG stated that the state-run Gujarat Urja Vikas Nigam Limited (GUVNL) passed on "undue benefits" to the tune of over Rs 587 crore to Essar Power Gujarat Limited (EPGL). "The change in delivery point (of a sub-station) subsequent to finalisation of power purchase agreement (PPA) led to passing of undue benefit to EPGL for Rs 587.50 crore during the tenure of the PPA (signed in February 2007," CAG observed.