CAG observation on Vizhinjam Port triggers political debate

The observation of Comptroller and Auditor General of India that interests of Kerala were not protected in the agreement with Adani groups and SEZ Private Ltd for the development of Vizhinjam International Seaport has triggered a political debate.

CAG in its report on public sector undertakings for the year ended March 2016, tabled in the state assembly today, pointed out lapses on part of the state government while signing the agreement for implementing the Rs 7525 crore multipurpose seaport project coming up at nearby Vizhinjam.

Reacting to CAG findings, State Finance Minister T M Thomas Isaac said the report has confirmed the criticism raised by the LDF against the project, but "we are not going to scrap the project."

The CAG report also said the technical and financial estimates prepared by external consultants were not scrutinised with due diligence resulting in inflation of cost estimates.

"The interests of state government were not protected adequately while drawing up the Concession Agreement," it said in its conclusion.

Stating that standard concession period for the PPP project was 30 years and by allowing 10 years, extra concession period in the agreement for Vizhinjam, the Concessionaire (Adani Group) would be collecting additional revenue of Rs 29,217 crore, based on revenue estimates in Feasibility Report by Ernst and Young.

As per the agreement, Adani group was responsible for funding and development of dredging and reclamation of 53 acres of land from the sea, construction of berths and related infrastructure and operation of the Port.

Total cost of the project was estimated as Rs 7525 crore.

On this Rs 2454 crore is the investment by Adani group for and Rs 1635 the Viability Gap funding of Centre and state and Rs 3436 crore by the state.

With regard to the financial and economic viability of the project, the report observed that in spite of 67 per cent investment by the state, the financial benefit accruing to the state was not commensurate with its investments.

Agreement for project was signed by the previous Congress-led UDF government headed by Chief Minister Oommen Chandy and the work was formally launched in December 2015.

Defending the UDF decision on the project, Chandy said long term interest of the state had been protected in the deal.

"CAG looks over the technial aspects of one year.. The state government would have erred in giving correct reply to CAG queries," Chandy said in the assembly.

However, former KPCC President V M Sudheeran termed the CAG observation as "very serious" and said "it will be proper to have a comprehensive examination on the matter." CPI-M State Secretary Kodiyeri Balakrishnan said the points raised by CAG needed to be examined.

State Minister for Ports Kadannapally Ramachandran said that a decision on all legal and policy matters could be taken only after a discussion with Chief Minister Pinarayi Vijayan.

The CAG report comes a day after CPI-M veteran and former Chief Minister V S Achuthanandan demanded a 'White Paper' from the party headed LDF government on the Vizhinjam agreement alleging irregularities in it.

Vizhinjam port development was a dream project of the state for a long period as it was first proposed in 1991 when late Congress leader K Karunakaran was the Chief Minister.

But it did not materialise due to various reasons.

The project got a push during the previous UDF regime in 2011 and the agreement was signed with Adani groups under PPP route on Design, Build, Finance, Operate and Transfer basis (DBFOT).

LDF then in Opposition, had objected to implementing the project in private sector and had levelled allegations of corruption in the deal.

Chief Minister Pinarayi Vijayan had stated earlier that the government would implement the project as there was no option before it other than to execute the project.

(This article has not been edited by DNA's editorial team and is auto-generated from an agency feed.)