No tenders advertised for work worth Rs 662 crore on Gomti river front project: CAG audit

The Gomti Riverfront Development Project in Lucknow, long mired in controversy over irregular dealings, has invited scathing criticism from the Comptroller and Auditor General. Will the CBI and ED take cognisance of these audit findings and seek help from the auditors in evidence-gathering?

Riding on the wave of riverfront development as exemplified by the Gujarat Sabarmati Riverfront project, the Uttar Pradesh government approved the Gomti Riverfront Development Project (GRDP) at an estimated cost of Rs 656.58 crore in March 2015.  By September 2017, Rs 1447.84 crore had already been spent, though the project still remains incomplete. Now, in a CAG audit report tabled on February 7 this year, the project has come under scathing criticism, on various grounds as outlined below:

The case of the missing tender invites

The office of the Comptroller and Auditor General of India examined files of the project in order to ascertain whether the norms for the tendering process had been followed. They found copies of letters, purportedly issued by the Superintending Engineer and Executive Engineer to the Director, Department of Information and Public Relations (DIPR), for publication of 24 Notice Inviting Tenders (NITs) valued at Rs 1188.74 crores. On the record, there was also a reply from the Director, DIPR confirming that these 24 NITs had been actually published on specific dates against specific advertisement order numbers in newspapers.

Auditors probed these records further and cross-verified the authenticity of these letters with the DIPR. Upon such probe, it found that except for one NIT valued at Rs 525.77 crore (pertaining to the Diaphragm Wall), none of the remaining NITs valued at Rs 662.58 crore pertaining to this subject had been published in newspapers by DIPR.

So how did the officials produce the letter from DIPR mentioning the dates and advertisement order numbers? In a shocking revelation, CAG auditors found,

“The copies of the advertisements actually published by DIPR against the said advertisement order numbers pertained to the other departments on different subjects and were not related to Gomti Riverfront Development Project.”

Without mincing words, the CAG report states that this meant violation of the Central Vigilance Commission’s (CVC) July 2007 guidelines, which stipulate the award of public contracts through open tender to ensure transparency in public procurement, to promote healthy competition amongst tender submitters and to eliminate irregularities, interference and corrupt practices by authorities concerned.

Having outlined how evidence with regard to the publication of NITs was fabricated by officials, the CAG writes a recommendation in red ink in the report:

“…the fraud merits examination from a vigilance angle for disciplinary enquiry and criminal prosecution.”

Readers may wonder how the audited entity – the irrigation department – responded to this grave audit finding. The CAG audit report states that

“Though the department furnished an interim reply (February 2018) to Audit, nothing further has been informed till date (August 2018) despite the seriousness of the issue and the department being reminded (July 2018).”

Undue favours

Audit scrutiny also found that the firm M/s Gammon India Ltd. was awarded the work of construction of a diaphragm wall at a cost of Rs 516.73 crore, although the firm was ineligible since they didn’t have the experience as stipulated in original tender documents. It seems in order to facilitate this firm, the department issued a corrigendum diluting the conditions.

Auditors also found that this corrigendum was not published in newspapers, nor was there any record of the purchasers of tender documents being informed about the change. The CAG audit report concludes that

“Consequently, competitive bidding process was violated and the department was deprived of the opportunity of obtaining more competitive bidding from other bidders.”

Audit scrutiny also found that the firm M/s Gammon India Ltd received an undue benefit of Rs 10.40 crore at the cost of the public exchequer! Well, how did that happen?

The CAG report tells us that the agreement between the Irrigation Department and Gammon India stipulated that the department would import rubber membranes by floating a global tender and provide the same to the contractor. However, in January 2016, the firm was allowed to import a rubber membrane on its own for Rs 18.84 crore (including customs duty), against which the department paid Rs 29.24 crore to the firm in March 2017.

Having underlined this undue favour granted to a firm, CAG report states,

“The matter merits examination from a vigilance angle for departmental action and criminal prosecution.”

Once again, the CAG audit report states that the department’s reply (dated February 2018) did not address the audit observation!

In yet another irregularity, the award of construction work (on Intercepting Trunk Drain for channelization of Gomti river) to M/s K K Spun Pipe Pvt Ltd was done by rejecting another eligible firm. The CAG audit report states,

“There was no evidence that the tender evaluation committee performed any technical evaluation of bids and no technical evaluation report was prepared.”

What is even more shocking is what gets reported under an audit paragraph titled, ‘Non-production of records’. The report states,

“The Executive Engineer, Lucknow Division, Sharda Canal did not produce 26 records requisitioned by Audit (the details given in appendix 1.1) and replies were also not furnished for 230 audit memos relating to this project.”

A long and murky history of irregularities

During the year 2017-18, the project was mired in controversy with allegations of financial irregularity and multiple probes; work had come to a standstill. As soon as there was a change of guard in UP following the state elections, the newly elected government constituted a committee headed by a retired judge of the Allahabad high court, Alok Kumar Singh.

In its report dated May 16 2017, the Singh committee stated that prima facie, the nature of irregularities in the project called for criminal investigation. This was followed by a chain of events and investigation, as can be seen below:

Gomti probe: A timeline

June 19, 2017: On the basis of the committee’s report, the Uttar Pradesh police registers a case and begins the probe.

July 2017: The state government seeks CBI probe in July 2017; Centre directed the matter to CBI on November 24, 2017.

December 2017:  The Enforcement Directorate (ED) registers a case against eight engineers of the state irrigation department, who were involved in the project for criminal misconduct, breach of trust, cheating and forgery.

April 2018: The Lucknow Development Authority files a preliminary project report with the Irrigation Department of UP, suggesting ways to rejuvenate the river and beautify the river-bank area.

September 2018: Even as the ED was proceeding with the probe, the newly elected Adityanath government orders a CBI probe into the matter.

January 2019: The alleged irregularities again hits the headlines, as the ED carries out multiple searches across various states.

Given the history, therefore, one needs to read the audit paragraphs discussed above in the light of the fact that the tendering process has already come under the scanner of investigative agencies. What is to be seen now is whether the CVC will take cognisance of the unambiguously worded recommendations by the CAG of India and initiate criminal proceedings against the erring officials.

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