Power play: DVC bends for RInfra

The Damodar Valley Corporation (DVC) has come under further cloud regarding the commissioning of six power plants to supply power to Delhi during the 2010 Commonwealth Games (CWG).

DNA has found that DVC violated rules to award the Anil Ambani-owned Reliance Infra Limited an Engineering Procurement and Construction (EPC) contract worth Rs4,000 crore to construct a 1,200 MW power plant in Raghunathpur, West Bengal.

DVC also gave Reliance an interest-free loan of Rs354.07 crore in violation of Central Vigilance Commission (CVC) guidelines. The loan was given to Reliance before it submitted all bank guarantees (BGs) and before an agreement was signed.
The contract for the Raghunathpur Thermal Power Plant (RTPP), located in WB’s Purulia district, was awarded to Reliance on a single tender basis without re-tendering despite other bidders, including BHEL, formally asking that the tender opening date be extended.

DNA has documents that show that AK Barman, ex-chairman, DVC; Subrata Biswas, ex-secretary, DVC, and currently principal secretary, animal husbandry, Govt of Kerala; Gautam Chatterjee, ex-Chief Vigilance Officer (CVO), DVC, now vice-president & CEO, Maharashtra Housing and Area Development Authority (MHADA), and top officials of the ministry of power were involved in awarding this questionable contract. It is alleged that the contract was given in lieu of kickbacks and the matter needs to be investigated further.

Even as questions were raised over the awarding of the contract, the main contract file disappeared from the DVC office, making it impossible for the CAG to begin an audit of the contract. While DVC bent several rules to award Reliance the RTPP project using the urgency of the 2010 Games as an excuse, the project along with five others commissioned, is still incomplete. The projects are part of a power purchase agreement (PPA) executed between DVC and Delhi Transco Ltd in August 2006 for the supply of 2,500 MW of power for the CWG.

The contract: Tailor-made for Reliance Infra
A notice inviting tender (NIT) was issued in May 18, 2007, through the international competitive bidding (ICB) route for which the extended bid submission date (during the pre-bid conference) was July 31, 2007. Three out of the four bidders — Dongfang Electric Corporation, China; China Machinery Engineering Corporation (CMEC) and Bharat Heavy Electricals Limited (BHEL) in letters dated July 9, July 18 and July 21 requested that the dates be extended to August 31, August 14 and September 10 respectively.

However, the DVC management denied an extension, stating that it would impact the project schedule geared towards supplying the CWG with power. This denial is against a chief technical examiner’s organisation (CTEO) manual of the CVC that states that for any big project, extensions asked for by a majority of bidders, may be considered in the interest of the project. Because of this non-extension, the other three bidders couldn’t submit bids and Reliance Infra was the only company to do so.

DVC opened the Reliance bids by August 31. In the negotiations that followed, Reliance submitted a revised price of Rs 3,725 crore on September 14. During negotiations, DVC officials accepted Reliance’s request for interest-free loans.

Controversially, DVC also accepted a modification of a coal specification that Reliance wanted along the lines of its plant in Hisar. This violated another CVC guideline that specifies neither party can change any tender specification after the bid is opened.

“Accepting this is a clear favour by DVC management which includes the then chairman, secretary and CVO,” says Padamjit Singh, chairman, All India Power Engineers’ Federation (AIPEF).
After the deed was done, the DVC board curiously decided to seek the CVC’s advice regarding its decision not to extend the date of submission of bids as per the request of the three other potential bidders.

DNA has a copy of a letter dated October 4, 2007, to the CVC on behalf of the DVC board by the company’s CVO Gautam Chatterjee in which the CVO suggests the DVC board was justified in not extending the date for the submission of bids and that the decision did not lack fairness or transparency.

Chatterjee’s role in sending the letter is questionable since he should not have been party to processing and decision-making as a vigilance functionary.

To this, the CVC replied that “an extension of time or snap bid” is the preferred option. A ‘snap bid’ is a period of time given to those who have made a bid but do not fulfill tender specifications. This allows bidders to bring their bid up to required specifications. The DVC management seemed so desperate to ink the deal that it approached the CVC again via Chatterjee. This time, Chatterjee personally met Pratyush Sinha, the then CVC. The result was that the CVC removed the option of an ‘extension of bid’ and suggested ‘snap bid’ as the only option. “Such an intervention on the part of a CVO clearly suggests his intentions,” said AIPEF’s Singh.

Since technically, ‘snap bids’ are open to those who have made a bid in the first place, the ‘snap bid’ was an unfair option as of the four bidders who purchased bid documents, only Reliance Infra actually submitted the bid and was technically eligible for the ‘snap bid.’ DNA has a copy of a letter written by chief engineer, central electricity authority (CEA), part of Ministry of Power, dated October 30, 2007, where he suggests the ‘snap bid’ option was unfair since the other three bidders had not participated in the earlier tender and therefore it was inappropriate to invite snap bids from these bidders.

The letter adds that bidders need to be given adequate time in view of the complexity involved in the preparation of tender documents. However, the DVC went ahead with the ‘snap bid’ with the clause of revised coal specifications and the provision of an interest-free advance.

DNA has documents which prove that the inclusion of ‘interest free advance’ during the snap bid was not passed by the finance department. In a tender process, two bids are made. One deals with the project cost and the other details technical specifications.

While Reliance was asked to submit the price bid, the others were asked to submit the techno-commercial bid, too. To this, the chief engineer’s letter referred to earlier said: “Coal quality to be considered has been modified in the new bid proposal. Since the change in coal quality will involve major changes in the design of boilers, coal mills, electrostatic-precipitator & ash handling system, bidders should be given a reasonable time to submit the offer.”

Documents suggest that the other three bidders were not given any details of the issues that DVC and Reliance Infra had negotiated upon. “Since DVC have held a series of discussions with Reliance, who was the only bidder against their earlier bid, it is desirable that deviations/clarifications that have been given to REL are also made available to all bidders so as to provide a level playing field to all of them,” said the CEA letter. The result: No other bidder submitted a bid and Reliance Infra was awarded the contract.

A day after the DVC board met to consider the bid on December 11 2007, it sent a letter of acceptance (LOA) to Reliance. Giving an LOA within a day is unprecedented. In DVC’s case, the LOA was given even before the board meeting’s minutes were circulated.

When DNA spoke to some DVC employees, they said the then power minister Sushil Kumar Shinde and power secretary Anil Razdan visited the DVC office on December 11, 2007 to ensure the deal was passed. However, DNA has been unable to verify this independently. Interest free in Reliance’s interest
This was not all. DNA found that besides irregularities in the tender-awarding process, DVC favoured Reliance by granting it an interest-free loan in complete violation of CVC guidelines. Though bid documents said DVC would grant the successful bidder a loan @12.75%., Reliance was offered an interest-free loan after the bid was opened. This is in violation of CVC guidelines that stipulate that if an interest-free loan is necessary, it should clearly be stipulated in tender documents itself. In exchange for this relaxation, Reliance reduced its bid amount by Rs100 crore. But even by a conservative estimate, DVC lost Rs 50 crore because of the interest-free loan. There are questions over the loan disbursement too.

The Letter of Acceptance (LOA) issued on December 11, 2007 mentions that a mobilisation advance would be given only after Reliance issued all bank guarantees (BGs). CVC guidelines also stipulate that an advance should only be given after all BGs are submitted. But Reliance was paid the first installment of Rs173.56 crore on December 17, 2007 even though it had not submitted all BGs. DVC justified the haste, saying it was done because it needed to fix the zero date (date project officially begins) as December 14, 2007 given the Commonwealth Games deadline.

But even the second loan installment of Rs183 crore was given ignoring provisions made in the letter of intent (LOI) issued on February 29, 2008. The LOI says an advance cannot be given without signing a contract agreement. A Reliance spokesperson said that the company was not ready with its reply to DNA’s and it would formally communicate with DNA on Monday. When contacted, Chatterjee said: “I have nothing to add on this
matter. I am not aware of any of this.”

The mystery of the missing file
When CAG attempted an audit to see whether the interest-free loan to Reliance was justified, the DVC management informed it that the main file for the Rs4,000 crore project was missing. Not only that, the DVC management did not bother to file an FIR regarding its loss, a procedure ordinary people follow after the loss of simple documents like a driving licence or passport.
DNA has copies of letters exchanged between the CAG and the DVC management between November 2009 and till the end of 2011. The letters astonishingly suggest that the DVC management intended to hush up the matter. In one letter, from M. Mukherjee, Sr audit officer, DVC HQ, to the director (projects), DVC, dated February 12, 2010, Mukherjee asks for the exact date the main contract file went missing. The letter asks whether any action was taken and if not, the reasons thereof. It also asks whether DVC filed an FIR reporting the loss.

The CAG also wrote two more letters asking for the same, to no avail. Finally, on May 11, 2010, the chief engineer, DVC, replied, saying that the exact date was not known and that a one-man committee had been constituted to look into the loss.

DNA found that the DVC management was misleading the CAG by giving such information since GS Sarna, who submitted a CVO report following a complaint by MP Rabindra Kumar Rana, said the file was missing since August 2008, months after Reliance was paid the advance.

DNA has a copy of minutes of a December 18, 2011 meeting held by P Umashankar, secretary (power), where he emphasises that reconstituting a new contract file would be enough to address the issue of the missing file. “The main file of a contract worth Rs4,000 crore has gone missing but the management didn’t bother filing an FIR. This clearly shows it wanted to hide its misdeeds,” said a senior DVC official.

Subsequently, the CAG wrote several letters dated December 13, 2010, January 14, 2011, January 20, 2011 and March 17, 2010 seeking the findings of the one-man committee. To this, the DVC management directed the CAG to approach one department or the other. In a letter dated September 20, 2011, the CAG wrote to the additional secretary, DVC, saying: “I am to state that reply to the same (above dated letters) has not yet been received from your end despite issuance of repeated reminders/several personal persuasions. Since the matter is urgent and needs to be sent to C&AG’s office, New Delhi, the same may please be furnished to this office expeditiously.” The file is still missing.