Thane-Bhiwandi bypass project under cloud

Under shadow is the Public Works Department of the State Government. Sources say that the contract was signed in such a hurry that the pre-requisite feasibility study was not conducted, technical approval (TA) which is a must for such projects wasneither sought nor given, and detailed estimates were not prepared by the PWD. Instead, the government signed the contract at a price that IRBL quoted — Rs three crore for a kilometer — when similar work on the Mumbai-Ahmedabad National Highway 8 with World Bank involvement costs Rs 2.35 crore per km, sources said.

Also, the procedural requirements in the Union Ministry of Surface Transport were hurried so much that the IRBL proposal was given approvals by the entire hierarchy the Directorate General of Road Development, Additional Secretary (financial approvals), secretary-level in the ministry and finally Minister Thambi Durai himself in a single day. No questions were asked on any aspect of the proposal, sources said.

The Bombay High Court will soon hear a writ petition challenging the validity of the contract. Filed by Chhagan Bhujbal,leader of the Opposition in the Legislative Council, the petition requests for scrapping the contract and inviting new tenders. Interestingly, the Central VigilanceCommission (CVC) has been made a respondent in the case and requested to initiate inquiry against ministers, bureaucrats and officers instrumental in allotting the work to Ideal Road Builders.

Drawn up on Build-Operate-Transfer basis, the contract is a clever document. Risks have been passed on to the government but benefits are not similarly transferred. The crux is that costs are padded up during the construction period and incorrect assumptions are made to guarantee high returns to the company till 2017. “It’s a clear case of fraud on public money… if one company gets to profit so much, there must be some reason behind it,” says Bhujbal.

The difference of Rs 65 lakh a km gives IRBL a cushion of nearly Rs 14.95 crore. Then, the interest charged on investments during the construction period has been cleverly drafted to give the company an additional Rs 10 crore, sources said. This because the contract permits IRBL to get away with 20 per cent compounded every month though rules only allow 20 per centinterest per annum. The most significant part of the fraud is in the “concession period” granted by the governments to the company that enable it to make nearly Rs 754 crore in toll collection later.

The term “concession period” refers to the time/years that a company is allowed to collect toll in a BOT contract before its tranfers the facility to the government. IRBL has been given gross deductions amounting to almost 50 per cent which means the government/exchequer receives that much less from the toll. Crucially, the company has been allowed to collect toll till 2017 though the concession period could have ended in 2011 the six additional years give it a runaway profit of nearly Rs 754 crore, points out the petition.

This is likely to become the most disputed aspect of the contract; sources say that the PWD calculations also initially showed that the concession period should end in March 2011 since the company would have recovered all its investments and made a profit by then. However, it wasgranted the additional seven years which can be termed as a loss to the exchequer, states the petitioner. Considering that IRBL is already a toll collection agent for the government, the contract comes under a cloud.

PWD Minister Nitin Gadkari is unfazed. There is nothing wrong or illegal in the contract, he said. “The company was already there and we didn’t want to lose time in starting work. This is nothing but business rivalry between different companies because of which we are all being dragged to the court,” Gadkari said but emphasised that it was the Union Government that put its seal on the contract. IRBL senior officials promised but did not respond to the questionnaire sent to the company last week.