THIRUVANANTHAPURAM: The civil report of the Comptroller and Auditor General of India (CAG) for the year ended March 31, 2005, tabled in the State Assembly on Thursday, reveals "violation of contract obligations and undue favour[s] to contractors" under the Kerala State Transport Project (KSTP), causing a loss of Rs.92.87 crores to the State exchequer.

This World Bank-aided project, launched in June 2002, envisaged upgrading 600 km of State Highways in two phases, larger works of maintenance of Highways for a length of 1,000 km in three phases and improvement of navigable waterways for 100 km at a total cost of Rs.1,600 crores.

The World Bank loan component was Rs.1,216 crores (76 per cent) and the State Government's share Rs.384 crores (24 per cent). After evaluating the progress of the works in October 2005, the Government found the originally estimated investment inadequate to complete the project and sought an additional loan of Rs.528 crores for it.

The CAG says that test checks conducted between August 2004 and December 2004 had revealed "lapses/defects in the contracts, awarding of contract at higher rates, premature conclusion of contract, extension of contractual period and appropriation of borrowed funds for improvement of National Highways [the upkeep and maintenance of which are actually the responsibilities of the Union Government]." The CAG found that a stretch of 44.43 km selected for upgrading under the KSTP formed part of the National Highways. "The State Government should not have awarded the work to the contractor and the appropriation of Rs.75.28 crores (approximately) from borrowed funds constituted an injudicious charge on the project," the report says. Another irregularity related to the realisation of Rs.5.93 crores from 11 contractors towards liquidated damages for their failure to complete the works in time. "The amount recovered from these contractors as of August 2005 was only Rs.1.17 crores, leaving Rs.4.76 crores still to be recovered," the CAG says.

While awarding one of the contracts under the project, the Project Management Team (PMT) headed by the secretary of the Public Works Department overlooked the claims of a firm that scored well in financial evaluation, leaving a monetary burden of Rs. 3.53 crores on the project cost. Some of the other lapses mentioned in the report include premature closure of contracts to the advantage of the contractors.

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