APTDC incurs Rs 44cr loss

Loss due to cancellation of bid for no valid reason

The Andhra Pradesh Tourism Development Corporation Limited (APTDC) has incurred a revenue loss of Rs 44.27 crore on account of cancellation of a financially advantageous bid for construction, operation and management of a three-star hotel at Vijayawada "for no valid reasons", according to Comptroller and Auditor General of India (CAG).

The CAG report for the year ended March 31, 2005, stated that APTDC, in the year 2001, had earmarked an extent of 96 cents of land for construction of the hotel, which was offered for lease for a period of 33 years.

The annual lease rent was fixed at five per cent of the market value of the land (Rs 14,000 per square yard) with a provision for escalation by five per cent every year over the period of lease. In addition to the lease rent, the bidders were required to offer a one-time upfront fee and an annual licence fee over the period of lease.

In the open tenders invited by APTDC, the corporation selected Vignesh Enterprises Private Limited (VEPL) for the project in May 2001. It had issued a letter of intent (LoI) to VEPL, which offered an upfront fee of Rs 1.04 crore and an annual fee aggregating Rs 22.86 crore.

As the availability of 96 cents of land offered for construction of the hotel was doubtful due to road widening works, VEPL sought extension of time till the actual area available for construction was known.

However, the CAG report stated, APTDC, instead of determining the actual land available, cancelled the LoI and invited fresh offers in November 2002 from the remaining four short-listed bidders. When the bidding process was on, the land area actually available was determined at 75 cents.

After two rounds of bidding, APTDC received two bids in April 2003. Of the two, the corporation selected the bid of Laila Real Estates (P) Limited (LREPL), which offered Rs 63.45 lakh towards upfront fee and an annual licence fee aggregating Rs 2.05 crore.

CAG pointed out that the cancellation of LoI issued to VEPL did not serve any purpose except for losing the financially advantageous bid resulting in a loss of Rs 18.38 crore by way of upfront and annual licence fee. The offer of LREPL in response to limited tender call of January 2003 was also short by Rs 4.81 crore when compared to its original offer in response to open tenders called in January 2001.

This apart, in the limited bids called for in January 2003, the market value of the land was indicated at Rs 14,000 per square yard for computation of lease rent, although the prevailing market rate at that time was Rs 30,000 per square yard as per the report furnished by revenue authorities.

Thus, APTDC has incurred a further loss of Rs 25.89 crore by non-adopting the increased market rate for computation of lease rent, CAG stated.

The CAG's audit report on the existing 54 public sector undertakings in Andhra Pradesh highlighted deficiencies in the management of PSUs, which had serious financial implications.

The report stated that PSUs had incurred a loss of Rs 418.90 crore on account of faulty planning and procedural lapses, injudicious investments and decisions, undue benefit accorded to contractors and defective terms and conditions of agreement.

Pointing out that there were instances of avoidable and wasteful expenditure of Rs 111.52 crore, the report stated that the Transmission Corporation of Andhra Pradesh had incurred an extra expenditure of Rs 7.84 crore by failing to finalise two open tenders within the validity period of 120 days.

The Southern Power Distribution Company of AP had also incurred a loss of Rs 2.79 crore by classifying three railway stations under the HT-VI category instead of HT-II resulting in short billing of energy charges.

Similarly, the report said, Andhra Pradesh State Road Transport Corporation had incurred "avoidable" expenditure on payment of interest of Rs 7.28 crore due to failure to negotiate revision of interest rate on outstanding loans.

On the other hand, AP State Warehousing Corporation made "irregular" payment of production incentive of Rs 3.45 crore to employees without approval of the administrative department concerned and without formulating any guidelines.