A report from the Comptroller and Auditor General of India (CAG), tabled in Parliament on Thursday, has rapped Delhi Metro Rail Corporation (DMRC) on the troubled Airport Express project.
The public-private partnership (PPP) project, which took Rs 5,697 crore to build, has been widely commented on for a long while. It was closed after cracks in the line and then reopened. And, last month, Reliance Infrastructure's special purpose vehicle, Delhi Airport Metro Express Ltd (DAME), announced it would not operate the line any more, citing 'material breach' of the concession agreement.
Apart from the criticism of DMRC and DAME, the CAG report asks how DMRC could allow such shoddy drafting of the concession agreement and also fail to keep a vigil on a key escrow account that let DAME dilute equity, default on payments and make investments only in other Reliance Group companies.
As Business Standard had reported earlier, the equity in the Airport Express line from DAME is a mere Rs 1 lakh. The CAG report states the guidelines set by the government to maintain the debt:equity ratio of 7:3 were "neither incorporated in the concession agreement, nor complied with by the concessionaire.
Further questions have been raised as to why DMRC did not insist on maintaining the debt-equity ratio. It merely asked in June 2012, about 15 months after conversion of the share application money worth Rs 612 crore to subordinate debt. CAG notes the reasons for conversion have not been put on record and the concessionaire was running a project worth Rs 5,697 crore with "an insignificant risk of Rs 1 lakh". DMRC did not furnish any justification for non-incorporation of the debt-equity ratio in the concession agreement.
DMRC has also been criticised for allowing the concessionaire to contribute only 46.17 per cent in the project, against the requirement of 60 per cent in the guidelines of the ministry of finance. The ministry had set the level of financial support in PPP projects to a maximum of 40 per cent.
DMRC had said in response that the Airport Express line had a different structure, an argument rejected by CAG on the grounds that "all benefits of a PPP were available to the private partner"; hence, the guidelines should have been adhered to.
The report also highlights the absence of any penal clause in the concession agreement. The report notes DMRC suffered losses worth Rs 57 crore by non-realisation of the annual concession fee and subsequent interest. It also failed to timely monitor the escrow account; between 2009 and 2012, DAME 'released' Rs 285 crore from the account to other Reliance Group companies.
Even more intriguing is the Rs 59 crore released in 2010-2011 from the escrow account to Utility Tech Pvt Ltd, non-existent at that time and renamed Reliance Utility Engineers.
Further, on DAME's request in March 2009, the chief project manager at the Airport Express line had issued a recommendation letter for availing concession on customs duty; on its strength, benefits were given worth Rs 29 crore.
The catch is that the initial cost approved for this project by the Empowered Group of Ministers, headed by the finance minister, was inclusive of taxes and duties. The report notes that DMRC did not refer the request to the ministry of urban development but had issued a letter directly.
