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Audit finds discrepancies in selection of private partner for Puducherry port

PUDUCHERRY: Besides finding fault in the process of selecting the private player for the development of the port here, a team appointed by the Union Ministry of Home Affairs has found the project economically “unattractive.”

The team, in its special audit report on the port project, has found several discrepancies in the process followed for selecting the developer and also in the contract agreement entered into by the developer with the Government of Puducherry. The full audit report which runs into 200-odd pages had been posted on the Ministry website.

The report pointed out that “no pre-qualification” criteria such as financial status and work experience was analyzed before selecting the developer. The criterion of selection of M/S Subash Projects and Marketing Limited (SPML), New Delhi, the developer, was based on the first-come-first-serve basis.

Due diligence and justification in considering the financial status of SPML “was not” taken care of. In fact “no” analysis was made in selecting of the firm for the development of the Pondicherry Port, the report said.

In the selection process,, the consultant who had prepared the detailed project report was given the task to develop the port, thereby violating an internationally accepted practice of not allowing the agency that prepared the project report to participate in the bidding process, the report added.

The report also faulted the government for not conducting the mandatory Environment Impact Assessment before undertaking major projects. Questioning the government for selecting the developer without verifying the antecedents of the firm, the report said the credentials of the developer were “doubtful.”

Looking into the concession agreement signed between the territorial administration and developer, the report said the agreement does not provide the government any control over the port management and inspection during the development stage. Also, the agreement does not have provision for appointment of an independent engineer and development standards for the project, which was contradictory to the guidelines issued by the Ministry of Finance in this regard.

“Low” viability

Further, the lease rent was for “a meagre amount” and has got a direct “revenue loss of Rs 14. 50 crore per annum.” The financial viability of the project was also “low” and the internal rate of return with full cooperation from all stakeholders and assuming favourable situation was “quite low.”

“Therefore it can be clearly seen that the interest of Government of Pondicherry has been clearly compromised and the developer has been favoured unduly by the agreement,” the report went on to add.

Adherence to all prescribed norms in allocating the work with adequate guidance from the Ministry of Finance would have made this project a model for other initiatives. Due to non-adherence to the guidelines of the Government of India, the project has become economically unattractive, the report said.

The Supreme Court after reading regulation 6 (b) of the Pondicherry Act 1962 and the relevant portion of the Indian Ports Act had come to a conclusion that the power in respect of Pondicherry port necessarily vests in the government of Pondicherry and not in the Central Government.

The report said, in this regard, it can be stated that “the plane reading of regulation 6 (b) of the Pondicherry Act 1962, clearly means that any reference to the State Government shall be construed as reference to the Central Government. This is the correct interpretation of the regulation,”

It added, “because of this interpretation of the above mentioned regulation a considerable damage to the powers and the responsibilities of the Central Government has been caused… The above situation maybe because of the reason that the correct facts in this regard were not brought before the Honourable Supreme Court by the Government of Puducherry.”

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