CAG indicts Parrikar govt for irregularities

In a startling revelation, the Comptroller and Auditor General of India (CAG) on Thursday severely indicted fo earlier BJP government, led by Manohar Parrikar, for serious financial irregularities involving crore of rupees while hosting the International Film Festival of India (IFFI) in 2004.

Sangita Choure, accountant-general of the Goa Government, told Business Standard, "The CAG report has found several financial irregularities, huge expenditure overruns, faulty tendering processes and unnecessary expenditure by the BJP regime during the hosting of IFFI 2004".

In its report for the year ended March 31, 2005, BJP's technocrat leader Manohar Parrikar was heading the Goa State Infrastructure Development Corporation (GSIDC), the nodal agency for carrying out the IFFI-related works, the Core Committee and the Entertainment Society of Goa (ESG), which were directly involved in the conduct and organizing various works and activities during the film festival in 2004.

"Not only is this highly irregular, but violated all norms as one person was sitting in three important posts thus influencing decision," she added.

The GSIDC spent on these projects Rs 75.76 crore (till June 2005) in addition to leaving liabilities of Rs 21.21 crore.

The company invited Expression of Interest (EOI) from leaders in the multiplex industry for development of entertainment facilities comprising construction of a multiplex for the IFFI with minimum of three screens and total capacity of about 1,250 seats along with other supporting amenities required for the profitable operations of the proposed facility.

It received five applications of which only one application, PVR Cinema, satisfied the minimum eligibility criteria of experience and turnover.

The company relaxed the eligibility requirements and with this two more applications, ADLABS Films Limited and INOX Leisure Limited were also considered for further evaluation.

Based on the lead consultant, HOK Canada Inc's (HOK) recommendation the company found the proposal of INOX Leisure Limited as the most acceptable notwithstanding the fact that the ADLABS was the lowest bidder.

The financial bid of ADLABS was rejected based on the recommendation of the lead consultant who expressed a doubt about the design submitted by them and an apprehension about timely delivery of the multiplex.

Ironically the basis of this doubt and apprehension was not on record nor was it supported by any documentation.

Rejection of their offer, which otherwise conformed to the notified requirements with regard to number of screens/seating capacity, etc and was also lower by Rs 4.74 crore was, therefore not justified.

The report, however, underlined that even after viewing the presentation made by the bidders neither the lead consultant nor the company themselves decided upon the kind of structure they required for the multiplex. Resultantly, the company did not formulate any budget or upper limit for the multiplex cost.

Besides the economic viability of the project post IFFI 2004 was also not studied. The multiplex construction does not involve any specialised or complicated technology, as it is already available in other cities.

"For a project of such a nature the company should have finalised the technical parameters and then invited the bids, but it did not follow this," Choure said.

The company, however, failed to invite separate technical and financial bids despite the design parameters being broadly known. As a result, the bid values varied with the number of screens and seating capacity and were thus not comparable with each other.

The CAG report specifically mentioned that the rejection of the offer of ADLABS, which was done at the behest of the consultant without assigning reasons even though it conformed to the notified requirements, was also not justified.

The INOX Leisure Limited had originally quoted Rs 21.23 crore (Rs 19.13 crore for the multiplex proper with six screens and 1,250 seats and Rs 2.10 crore for renovation of the existing buildings in the complex). The design finally approved was for a multiplex with four screens without any change in the number of seats.

INOX Leisure Limited agreed to reduce the cost by rupees one crore for reduction in the number of screens. The renovation of the existing old GMC buildings in the complex proposed by INOX Leisure Limited was specifically excluded from the agreement.

Despite the change in the original financial quote the company finalised the contract at Rs 21.24 crore without availing the benefit of savings of Rs 3.11 crore.

What was significant the company had not done any analysis regarding the comparative cost of multiplexes, which were already built up/operational in other cities.

The expenditure by the Manohar Parrikar government has drawn a lot of controversy and opposition from the public because of the huge expenditures involved.

The CAG report confirms these wasteful expenditure in all areas and states that "huge expenditure was incurred in haste by passing established tendering procedures, allowing inflated projections to be passed without adequate checks, passing exorbitant costs on consultants/contractors and architects though they lacked justification and transparency".

Highlighting each irregularity, the CAG report dissects each project such as the contract for the construction of the multiplex to INOX where undue benefit was given to the contractor, improvement, upgradation and beautification of roads, dredging of River Mandovi here in the capital city, restoration and facilities of upgradation works of the existing Kala Academy, landscaping and other civil works in the old Goa Medical College and excess fees paid to consultants and architects.

According to the CAG report, the multiplex contract was awarded at a cost of Rs 21.24 crore without comparison of the financial bids which were mixed up with the technical bids though the cost of multiplexes in other states are built in the range of Rs 8.5 to Rs 10 crore. What is shocking is that the GSIDC did not deliberate upon or use the information furnished by the ICICI that a world-class multiplex could cost Rs 6 crore.

The report also highlights "how an additional Rs 2.56 core was sanctioned by the GSIDC in the name of additional works and how the GSIDC manipulated contracts to include other subcontractors, for the Multiplex civil works, despite this being an irregular practice because the contractor M/s RBS Candiaparcar, was executing other civil works for the GSIDC".

Various other irregularities have also been bought to the fore like appointing a consultant for implementation of tender management and an independent technical auditor/cost auditor for the multiplex at a cost of Rs 51.63 lakh.

In addition, the GSIDC incurred an unnecessary expenditure of Rs 1.05 crore by agreeing to INOX's proposal to appoint a consultant, which was highly irregular.

The CAG report has also found fault with the GSIDC for paying an additional bonus of Rs 60 lakh to INOX for early completion of the multiplex after opening of the bids, which was undue favour of the contractor. What was shocking was that the payment was made without confirming INOX's eligibility of the claim, which was doubtful due to contradictory certificates of INOX's own consultant.

The report emphatically states that the GSIDC did not carry out proper surveys, the tendering process suffered due to lack of transparency, tender evaluation process was faulty and there were cases of excessive payments, wasteful expenditure and over dependence of consultants on all major works.

With all these financial irregularities, the State government had no option than to refer the matter to the Central Bureau of Investigation (CBI) for a proper probe.