The Comptroller and Auditor General (CAG) has claimed that the Urban Development department has shown undue favour to a Chennai based AK Aromatic company for setting up a plant at an estimated cost of Rs 15 crore for conversion of waste plastic into hydrocarbon fuel in Pernem without allowing any competition for the project.
In a report, the auditor said the department has contravened the Ministry of Finance guidelines of 2013 on viable gap funding (VGF) by exceeding its limit to 83 percent on granting financial assistance to the company which was twice the limit.
“The DPR of November 2013, based on which the Department invited counter proposals, showed an outright capital grant in the form of viable gap funding (VGF) and soft loan aggregating Rs 12.50 crore to the Company and a land parcel of about 8,000 sqm on long-term lease of 30 years. The Company’s investment in the project was confined to Rs 2.5 crore. This vital information was, however, not disclosed in the notice inviting counter proposals, thus, depriving level-playing field for the prospective bidders in the process of bidding and preventing competition and fair play”, the CAG said.
It is also pertinent to mention that royalty was the sole criterion for evaluation of bids. “Had there been substantial disclosures regarding concessions being offered by the state government in the notice inviting counter proposals, the government could have got a better rate of royalty than only two per cent offered by the company”, it suggested.
It has found that the case does not fit into the model of a Swiss Challenge bid where unsolicited bid is received because the proposal was invited by the government from the Company after visiting their plant at Alathur in Chennai.
The urban development department signed the concession agreement with the company in November 2014 for setting up a plant at Pernem on design, build, operate and transfer basis at an estimated cost of Rs 15 crore for a concession period of 30 years.
The project was supposed to be completed within nine months (including three months for obtaining all statutory approvals/ clearances) from the date of signing of the concession agreement i.e. by August 2015.
However, technical clearance by the Town and Country Planning Department was granted in April 2015 and construction license by Pernem municipal council was granted to the Company in June 2016.
Thus, against three months, the statutory clearances were granted after a delay of 16 months. Even after grant of construction license in June 2016, the Company has not installed the plant and machinery, and civil works in respect of only two of five blocks were completed up to the plinth levels as of November 2017. The project has been rescheduled to be completed by April 2018.
Of the total capital grant of Rs 6 crore, the Department released the first installment of Rs 2 crore to the Company in November 2014 (upon signing the concession agreement) which remained blocked for 19 months till June 2016 (date of grant of construction license), without any tangible benefit to the State.