Gujarat PSUs gave undue benefits to business houses: CAG


The CAG detailed undue favours to Reliance Industries Ltd, Essar Steel and Adani Power Ltd. It also highlighted that the state government has tweaked rules to grant land to Ford India Pvt Ltd as well as Larson and Toubro Ltd
CAG Vinod Rai

Gandhinagar, Apr 2 (PTI): The Comptroller and Auditor General (CAG) has said that government-owned firms in Gujarat granted “undue benefit” to big industrial houses, which resulted in revenue losses worth crores of rupees to the state exchequer.

The CAG report, for the year ended March 31, 2012, was tabled on Tuesday in the Gujarat State Assembly. The CAG detailed undue favours to Reliance Industries Ltd (RIL), Essar Steel and Adani Power Ltd (APL). It also highlighted that the state government has tweaked rules to grant land to Ford India Pvt Ltd as well as Larson and Toubro Ltd.

“Gujarat State Petronet Ltd (GSPL) was responsible for deviating from the agreed terms of recovery of gas transportation charges from the specified entry point of the company’s pipeline network and this led to passing of undue benefit of Rs 52.27 crore to RIL,” the CAG report said.

CAG was of the view that GSPL has failed to safeguard its own interest, leading to passing on undue benefit of Rs 52.27 crore to RIL. GSPL had entered into a gas transportation agreement (GTA) with RIL transport D6 gas from Bhadbhut in Bharuch district to RIL’s refinery in Jamnagar in March, 2007.

However, when RIL began transporting gas from its KG-D6 field to its refinery, GSPL did not invoke GTA terms and instead charged RIL a single rate on the quantity transported, thereby passing of undue benefit of Rs 52.27 crore to RIL.

Similarly, it has also highlighted that Gujarat Urja Vikas Nigam Ltd (GUVNL) was involved in non-adherence to terms of the power purchase agreement (PPA), which led to short recovery of penalty of Rs 160.26 crore and passing of undue benefit to Adani Power Ltd (APL).

On the other hand, the CAG report observed that GUVNL recovered a penalty of only Rs 79.82 crore from APL for its failure to supply power and also for the short supply of power against GUVNL’s entitlement in the power generated by APL during August 2009 to January 2012.

CAG also took strong exceptions to the Gujarat government regularising alleged encroachment of 7,24,897 sq mts of land by Essar Steel Company Ltd (ESCL) at Hazira in Surat, at the same price as government alloted land to L&T near ESCL, which resulted in short recovery of ad hoc occupancy price to the extent of Rs 238.50 crore.

“Government land measuring 7,24,897 square metres was encroached by ESCL in Hazira, Surat district. On request of the company, the government decided in July 2009, to regularise the encroachment by levy of 2.5 times of ad hoc value of land at Rs 700 per square metre, on the ground that, the land in a nearby area was given to L&T,” the CAG report said.

“We noticed that Rs 700 per square metre considered by the government for working out the ad hoc value was not justifiable,” the CAG report said.

“When pointed out, the government replied in June 2012, that as the company was incurring loss of Rs 200 crore per day, due to delay in completion of the project, an ad hoc price of Rs 700 per square metre was fixed,” it said.

In its report, CAG also alleged “playing around rules” by the state government to grant land to Ford and L&T at concessional rates.

As per the report, the state government had allotted around 460 acres (18,63,687 square feet) of land valued at Rs 205 crore to Ford India Pvt Ltd “for the purpose of establishment of a mega project of automobile and engineering for manufacture of automobiles at the rate of Rs 1,100 per square feet, fixed by the State Level Approval Committee (SLAC)”.

It observed that the SLAC had not been empowered to fix the rate of land for allotment to mega projects (above Rs 1,000 crore investment).

After the discrepancy was pointed out, the government replied that the SLAC had decided the value of land, based on some concrete facts, which is an SLAC practice and the price was also approved by the Cabinet.

The CAG said that the reply from the government is not acceptable, since SLAC is not empowered to do valuation of land.

It also recommended that the state government follow a uniform policy for allotment of government land to safeguard its revenue and public interest at large.

CAG also highlighted the case of allotment of land to L&T measuring 8,53,247 square metres at Hazira, Surat for setting up facilities for manufacture of super critical steam generators and a forging shop for a nuclear power plant.

A District Level Valuation Committee (DLVC) had recommended the rate as Rs 1,000 to 1,050 per sq mt. As the value of the land exceeded Rs 50 lakh, the revenue department sent the case to the SLVC for valuation. The SLVC recommended the rate at Rs 2,020 in September 2007 and the revenue department forwarded the proposal to the state Cabinet, prescribing the same rate.

CAG noted that the cabinet, in February 2008, granted a special concession of 30 per cent on the value of land fixed by the DLVC and allotted the land at Rs 700 to Rs 735 per square metre, as it considered the project “high tech” and “of national importance” as well as the first of its kind in Gujarat.

“It was seen from the above that the concession was granted on the price of land recommended by the DLVC. Thus, non-adoption of the value of land fixed by SLVC, resulted in loss of revenue of Rs 60.66 crore even after granting 30 per cent concession on the final value of land fixed by SLVC. The percentage of concession worked out to 65.20 per cent on price fixed by SLVC,” the CAG report said.


#Tata Mundra Project Under Investigation for Social and Environmental Policy Violations

Machimar Adhikar Sangharsh Samiti

Bhadreshwar, Mundra, Gujarat



Press Statement

New Delhi, August 6, 2012


Tata Mundra Project Under Investigation for Social and Environmental Policy Violations;

If Confirmed, Project Could Face Serious Repercussions


After a year of preliminary enquiry, and first of its kind in India for any projects, the recourse mechanism of International Finance Corporation (IFC) of the World Bank Group, the Compliance Advisor Ombudsman (CAO) has ordered a full investigation into the serious social and environmental policy violations by the Coastal Gujarat Power Ltd (CGPL – Tata Mundra project).  Machimar Adhikar Sangharsh Samiti (MASS) welcomes the decision.


With this, the first Ultra Mega Power Project in India to get clearance, Tata Mundra, which is running the risk of turning financially non-viable due to the decision of Indonesian government for revising its coal export pricing structure, which effectively doubled prices, is on dock for its poor social and environmental track-record, something which they camouflage behind claims of ‘responsible corporate citizen’. In the case of full investigation confirming the policy breaches, the project could face serious repercussions.


The key focus of the investigation, among others, will be on:


·         whether the IFC exercised due diligence in reviewing CGPL’s environmental and social assessments

·         whether IFC gave adequate consideration to the cumulative impacts o Adani Power and the construction of the Mundra West Port

·         whether IFC’s assessment of community support for the project was adequate, and

·         whether policies of IFC was correctly applied with regard to the complainants’ seasonal fishing settlements and fish drying areas


In June 2011, the people’s movement of fishing communities , MASS lodged a complaint with the CAO, raising the issues of failure to recognize large number of people as affected, loss of livelihood of thousands of fishworkers, pollution and health hazards due to fly ash, colossal destruction of mangroves and violation of environmental clearance.


“We are happy that CAO recognized the serious violations and have ordered a full investigation into it. We hope that they will go to the bottom of issues, investigate impartially and stop financing this project which is threatening the livelihood of thousands of fishworkers and the fragile ecology of Kutch”, said Bharat Patel, General Secretary of MASS.


While CAO identified key issues for investigation, we are disappointed that they decided not to look into the issues of salt-pan workers and grazers, who are also seriously impacted by the project, citing a technical reason that MASS raised these issues only in the rejoinder to the original complaint. Considering the capacity of local communities, whose access to detailed and timely information is seriously impaired, CAO should have looked into all impacts of the project, irrespective from where the information came in and when. After IFC financing a project, destroying lives of people, the onus of identifying all negative impacts should not be on the affected communities. We hope CAO will look at the issues comprehensively and not in piecemeal.


CAO in its report says about IFC being satisfied with the additional clearances the company obtained for changing the closed cycle cooling system into open cycle cooling system, in which the water is released to the sea at higher temperature than normal, which is detrimental to fish and other aquatic life. Any change of technology should have warranted a new Environmental Impact Assessment, including public hearings. We are not aware of any such. We hope CAO will enquire about the process which preceded change of technology.


Last month an eminent panel, after an independent fact finding visit to the affected areas and after extensive discussion with the company as well as communities, released its report, confirming serious social and environmental issues, depletion of fish catch since the project was commissioned, possibility of high radiation from fly ash, the company’s failure to conduct a cumulative impact assessment, communities were not adequately consulted and the project has blocked the access to fishing and grazing grounds. The panel recommended to the government to declare a moratorium on all projects in the region and recommended IFC to stop financing the project, until a comprehensive review is conducted.


The project is financed by IFC, Asian Development Bank, Korean ExIm Bank, State Bank of India, India Infrastructure Finance Company Ltd, and other Indian banks.


Contact: Bharat Patel – +91-9426469803



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