Hyderabad: Irrigation projects in Andhra Pradesh (AP) involving a combined outlay of Rs1.8 trillion have come under the scrutiny of the Prime Minister’s Office (PMO) following corruption charges by opposition parties in the southern state.
PMO has sought details of the engineering, procurement and construction (EPC) contracts awarded by the AP irrigation department, spelling potential trouble for the projects undertaken in the past five years.
Channeling funds: A file photo of the Polavaram irrigation project under way at Khammam and West Godavari districts of Andhra Pradesh. Bharath Sai / Mint
The Central Water Commission (CWC) wrote to the department asking for the details, which it said had been sought by PMO. A copy of the letter was reviewed by Mint. An official in the AP irrigation department confirmed that it had received the letter.
Officials at the PMO couldn’t be contacted for comment on Sunday. Prime Minister Manmohan Singh is on a visit to Saudi Arabia.
The Congress-led state government has taken up 86 major and medium irrigation projects since 2004-05 under its Jalayagnam (water worship) programme. Only four major and eight medium irrigation projects have been completed, with the remaining 74 still in different stages of development.
Till date, the state has spent Rs47,382 crore on irrigation projects and is still to spend Rs1.32 trillion, far higher than its budget for 2010-11 of Rs1.14 trillion.
These projects, whose timely execution now appears uncertain, were awarded to several leading Indian infrastructure firms under the EPC model and slated to be completed by 2012. These firms include IVRCL Infrastructures and Projects Ltd, Nagarjuna Constructions Co. Ltd, Hindustan Construction Co. Ltd, Gayatri Projects Ltd, Patel Engineering Ltd, SEW Infrastructure Ltd, Navayuga Engineering Co. Ltd and Mega Engineering Infrastructure Ltd.
AP’s worsening finances, against the backdrop of political instability caused by protests for and against the creation of a separate Telangana state, have already damaged the balance sheets of infrastructure firms. Delayed payments from the state government have been affecting the ability of infrastructure builders to raise money for projects.
Adding to their woes, Telangana Rashtra Samithi president K. Chandrasekhar Rao, who has spearheaded the campaign for the creation of a Telangana state out of AP, alleged “gross violation” of regulations and “enormous corruption” in awarding EPC contracts under the “garb of Jalayagnam”, in a letter to Prime Minister, Manmohan Singh on 10 October.
In the letter, a copy of which was reviewed by Mint, Rao sought a Union government enquiry into the “massive fraud of several thousand crores”. Alleging that the state government may resort to “manipulation and destruction of the records” of EPC contracts, Rao urged PMO to “immediately direct the CBI (Central Bureau of Investigation) to seize all the records of Jalayagnam contracts to facilitate detailed inquiry.”
“PMO has directed the Central Water Commission to immediately look into the matter and obtain all the details pertaining to award of EPC contracts in AP since 2004-05,” said a senior official in the AP irrigation department who did not want be named,
“CWC, in turn, has directed the AP government to immediately furnish the details of EPC contracts of irrigation projects, especially those assisted by the Central government funds,” said the same official.
Citing the PMO enquiry, CWC’s monitoring and appraisal directorate, in a letter dated 3 February, directed the principal secretary (projects) of the state irrigation department to urgently furnish the details of the EPC contracts. CWC sought from AP government the details of EPC contracts of all the irrigation projects that were being assisted under the Accelerated Irrigation Benefits Programme (AIBP).
Telugu Desam party chief N. Chandrababu Naidu, who heads the key opposition party in AP, has also alleged large-scale corruption in irrigation projects under the Jalayagnam programme and wrote several letters to the Prime Minister and President.
Mint could not verify whether PMO had sought details from the state government in response to the allegations made by Naidu. He had alleged that the cost of several irrigation projects was escalated significantly and designs of irrigation projects altered to benefit the contractors in return for kickbacks.
A senior civil servant in the AP irrigation ministry, who did not want to be named as he is not authorized to speak to the media, refuted allegations of wrongdoing.
“The EPC contracts awarding system that AP had evolved over the last five-and-a-half years’ period is considered the most stringent and robust in the country, leaving no scope to any kind of discretion, which is usually prone to pressures,” the person said. “And many a time, the state government was assisted by the project appraisal agencies belonging to CWC while awarding EPC contracts.”
The official conceded that the cost of some projects had escalated significantly after the EPC contracts had been awarded, but he attributed the increase to changes in the scope of the projects to expand the area they had been intended to cover.
For instance, the cost of the Sriramsagar Project flood flow canal was revised to Rs4,266 crore from Rs1,331 crore, the cost of the J Chokkarao lift irrigation scheme was revised to Rs9,317 crore from Rs6,016 crore and the Rajiv Bhima Lift Irrigation Scheme raised to Rs1,969 crore from Rs744 crore originally estimated.
Changes in the scope of irrigation projects and the resultant cost escalations were being periodically submitted to CWC since the state wants the Centre to fund up to 25% of the project costs under AIBP, the official said.
“The AP government has already accorded administrative approvals to these revised estimates and submitted them to CWC, of which some were already cleared by CWC and some were under its appraisal,” the official said.
The chairman of a leading infrastructure firm that is executing several irrigation projects in AP under the EPC route said on condition of anonymity that the projects risked being set back further.
“If CWC is not convinced of the justification offered by the AP irrigation ministry on cost escalations, then the state government may not receive the required funds under AIBP, which may in turn add to the state’s financial hassles and further slow the execution of irrigation projects,” he said.