Aug 18, 2012

Corruption back on national agenda


Tarun Shukla Liz Mathew & Utpal Bhaskar

New Delhi:

The country’s top auditor has put corruption squarely back on the national agenda, potentially compounding the political problems facing the Congress-led United Progressive Alliance (UPA) government.

In three separate reports, quantifying the notional loss to the exchequer at Rs 3.03 trillion, the Comptroller and Auditor General of India (CAG) has, for the first time, directly cast aspersions on the role of the Prime Minister’s Office (PMO) for its failure to check what it claims to be violations in awarding coal mining contracts, besides which it has found serious alleged infractions in the implementation of the UPA’s two boldest reform initiatives—privatization of airports and the setting up of large-sized power generation capacities on a fast-track basis.

The government was quick to deflect the allegations as premature, even while some of the companies such as ArcelorMittal were quick to dismiss the claims.

The three reports tabled in Parliament on Friday were Allocation of Coal blocks and augmentation of coal production, Ultra Mega Power Projects under Special Purpose Vehicles, and Implementation of Public Private Partnership—Indira Gandhi International Airport, Delhi.

In an indication of emerging political challenges for the UPA, the main opposition Bharatiya Janata Party (BJP) announced an intensified attack on the government, especially Prime Minister Manmohan Singh, whom it held “morally, politically and personally responsible” for the “wrongful” loss on the allocation of coal blocks. The BJP has sought Singh’s resignation and indicated that the party would raise this again in Parliament when it meets again on Tuesday.


The privatization and modernization of Delhi’s Indira Gandhi International Airport that started in 2006 was criticized by CAG. “Whenever DIAL (Delhi International Airport Pvt. Ltd, led by GMR Infrastructure Ltd) raised an issue regarding revenue to accrue to it or expenditure to be debited to government in contravention of the provisions of OMDA, the ministry and AAI (Airports Authority of India) interpreted the provisions always in favour of the operators and against the interest of the government,” CAG said in its audit, criticizing the role of the civil aviation ministry. OMDA refers to operation management development agreement.

The aviation ministry said it “strongly refutes the loss figures and other allegations as made in the report”.
Terminal 3 of IGI airport, in New Delhi. Pradeep Gaur/MintCAG slammed the government for giving out Delhi airport and its land with a potential earning capacity of Rs 1,63,557 crore to private-led operator DIAL, which made a total equity contribution of only Rs 2,450 crore. DIAL’s share of this land revenue was put at Rs 88,337 crore. CAG criticized the levy of the user development fee on passengers using the Delhi airport as also the formation of about a dozen joint venture subsidiaries under DIAL.

“The calculation of presumptive gain from the commercial use of land at the Delhi airport is totally erroneous and misleading as it simply adds the nominal value of the projected revenue, without taking the net present value. In fact, the net present value of the figure quoted by CAG is Rs 13,795 crore only. CAG has further failed to appreciate that 46% of this amount would be payable to AAI as revenue share,” the ministry said.

A key accusation relates to the grant of the airport itself. The auditor said the 30-year term was to be extended by another 30 years subject to “mutual agreement and negotiation of terms”. However, in the privatization agreement, the “mutual agreement and negotiation of terms” clause was dropped, seemingly giving the bid winner a clear 60-year term. It’s not clear who authorized the dropping of the clause. The aviation ministry didn’t comment on the matter.

DIAL said it “has not received any undue benefits from the government before, during or after the bidding process. The entire process of the privatization and selection of joint venture was based on a transparent, international, competitive bidding which was guided and presided over by competent bodies and has been upheld as such by the honorable Supreme Court in 2006”.

Praful Patel, aviation minister at the time of the privatization of the Delhi and Mumbai airports, said he had no comment to offer.

“The unseemly hurry with which the approvals were granted to DIAL” needs to be investigated and accountability fixed, said Mohan Ranganathan, an air safety expert and member of the government-appointed Civil Aviation Safety Advisory Council.

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