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Wednesday, January 28, 2009

Leftist Corruption: CPM's Rs 374.50 crore SCN-Lavalin scam

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SNC Lavalin scandal
SNC-Lavalin power scandal is one of the biggest financial scams that rocked Kerala, India. The Comptroller and Auditor General of India report indicted a CPI(M)-led government of the mid-1990s for a Rs 374.50 crore loss to the exchequer. Pinarayi Vijayan has been figured in the 9th accused by charge sheet filed by the CBI. Later, the CBI moved to seek Government's consent to prosecute him.

Three hydel power stations had to be upgraded, tenders were invited and was finalised to an Indian consortium and a Canadian MNC. The foreign company quoted Rs 2.42 crore per MW, the Indian consortium – BHEL and L&T – sought Rs 1.25 per MW. The contract went to the higher bidder, contrary to normal practice.

The Kerala State Electricity Board (KSEB) signed an MoU with SNC-Lavalin in August 1995. Under the provisions of the MoU, the funds for the renovation were to be arranged by SNC Lavalin from the Export Development Corporation (EDC), Canada, and the Canadian International Development Agency (CIDA). The Board did so, ignoring the CEA's recommendation that immediate replacement of the generating units at the Pallivasal power station was not called for as the plant was in fairly good condition. The Board undertook a feasibility study on the proposal only in September 1995, by a retired Chief Engineer of the KSEB, who later became a consultant to Lavalin.

Based on the consultant's report and further discussions, the Board signed contracts with Lavalin to provide technical services for management, engineering, procurement and construction supervision in February 1996, to ensure completion of the projects within three years. The consultancy agreements were converted into fixed price contracts for supply of machinery and techincial services as part of the renovation at a cost of 67.94M Canadian dollars (Rs.169.03 crores) in February 1997. During this period Pinarai Vijayan was the Minister for Electricity.

The CAG has found that Lavalin was only a consultant intermediary and not the original equipment manufacturer and that the supply of goods and services was made by other firms at much higher cost leading to excess expenditure. According to the CAG, the absence of due professional care in negotiating the foreign loan proved to be detrimental to the financial interests of the Board. The Board also could not ensure quality of renovation work in the absence of technology transfer and training of its engineers. Owing to various technical defects in the equipment, the generation of power could not be maintained even at the pre-renovation level and the Board had to spend on repairs.

According to the CAG, failure to exclude fee for technical consultancy from fixed price contracts resulted in avoidable payment of Rs.20.31 crores, and failure to negotiate and exclude the exposure fee from the loan agreement resulted in avoidable payment of Rs.9.48 crores and future liability of Rs.2.21 crores. In the opinion of the CAG, there was also an avoidable payment of Rs.1.20 crores as commitment fee despite there being committed but unavailed advance.

The CAG found that the Government did not receive Rs.89.32 crores out of the grant of Rs.98.30 crores that was promised for the Malabar Cancer Centre.

On 16th January 2007, Kerala High Court ordered a CBI enquiry into the scandal.

On February 19, 2008, CBI informed High court of Kerala that the investigation was progressing and said that former Electricity Ministers Pinarayi Vijayan and G. Karthikeyan would be examined at the appropriate time.

On 21st January 2009, CBI filed a progress report on the investigation in the Kerala high court. Pinarayi Vijayan has been named as the 9th accused in the case.
Lavalin scam: When power and politics collide
The scandal had its genesis in a 1996 agreement that the then Congress-led UDF Government got its Kerala State Electricity Board (KSEB) to sign with a Canadian power consulting company, SNC Lavalin. The contract was for replacing and modernising three major hydroelectric projects at Pallivasal, Sengulam and Panniar.

Soon after, Pinarayi Vijayan joined the Left Cabinet of E K Nayanar as power minister. Vijayan personally led the renegotiation of the earlier contract the KSEB had signed with Lavalin and subsequently went with Nayanar to Canada to seal the new deal. The new contract involved the state Government agreeing to cough up an additional Rs 149.15 crore to Lavalin for buying equipment from suppliers it named — Lavalin itself manufactured no such equipment.
CAG finds lapses in deal with Lavalin
Says the Rs. 374.50-crore renovation did not yield commensurate gains.

The Comptroller and Auditor General (CAG) of India has found that the expenditure incurred on the renovation of the Pallivasal, Sengulam and Panniar hydroelectric projects, with the involvement of the Canadian firm SNC Lavalin and spending Rs.374.50 crores, had not yielded commensurate gains.

The CAG report on the commercial activities of the State Government for the year ended March 31, 2005, tabled in the Assembly on Monday, says the Kerala State Electricity Board (KSEB) had undertaken renovation and modernisation of the three projects without conducting any feasibility study, disregarding the objections of the Central Electricity Authority (CEA) and without the prior concurrence of the CEA for incurring capital expenditure.
CBI to grill Pinarayi in Lavalin case

Pinaryai Vijayan's may figure in SNC-Lavlin scam

CBI set to prosecute CPM Kerala boss, party in a fix

CPM's Kerala secy under CBI scanner

CBI finds Pinarayi guilty in Lavalin scam, moralistic CPM yet to act
CPM’s cultivated ‘holier than thou’ image was blown to smithereens on Wednesday when the CBI implicated polit bureau member and
Kerala unit secretary Pinarayi Vijayan in the multi-crore SNC Lavalin case. The CPM, which goes off the collective rocker and demand resignations when rival politicians are confronted with similar situations, was silent on the action it proposes against the powerful party leader.

The CBI, which filed a progress report on the investigations in the case in the Kerala high court, has named Mr Vijayan, who was the state’s power minister, as the ninth accused in the case. The CBI has sought the governor’s permission to file a chargesheet that accuses Mr Vijayan and 10 others, including some officials, of receiving kickbacks for allotting a contract to the Canadian firm in 1997.

The Comptroller and Auditor General of India had found irregularities in the contract with SNC Lavalin of Canada for renovation and modernisation of the Pallivassal, Chengulam and Panniyar hydro-electric projects in Idukki district. Mr Vijayan had played the lead role in reworking the deal signed between KSEB and SNC Lavalin.

He had led a high-level official team to Montreal to revise the Lavalin contract. The consultancy contract was expanded to include a supply contract for procuring equipment. While the consultancy fee remained unaltered, the government committed an additional Rs 149.15 crore for buying equipment.

The Kerala government team had also negotiated a sub-deal with the company. Lavalin committed itself to mobilise Rs.98.3 crore for a party controlled cancer hospital in north Kerala. But the company paid only Rs 9 crore to the hospital.

CAG reported that the entire Rs 374.50 crore spent on the renewal projects went down the drain as the company did not complete the renewal process. Officials say that while replaced equipment have become unserviceable, not an extra megawatt of power is being generated from the three hydroelectric projects.
CBI seeks nod to prosecute CPM’s Kerala unit chief

माकपा के राज्‍य सचिव आकंठ भ्रष्‍टाचार में डूबे

CPM conspiracy theory falls flat in face of facts
The CPM has a stock answer to the charges of corruption against polit bureau member and Kerala unit secretary Pinarayi Vijayan — it’s
a frame up by the CBI at the behest of the Congress. But facts of the multi-crore SNC Lavalin scandal just do not substantiate this charge.

Here is the sequence of events:

February 2006: Vigilance SP filed an FIR in Vigilance Special Court in Trichur in the SNC Lavalin case. It had said eight people were involved in working out the sweetheart deal.

March 2006: The Oomen Chandy government wrote to the Centre seeking a CBI probe. The state issued a notification for the probe but the Centre did not issue the notification — a requirement for the CBI to take up the investigations......deleted.....
Does C in CPM mean corruption?

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