How did transgrid tender costs rise? Congress alleges malpractices by KSEB, KIIFB

Opposition charge KSEB and KIIFB with colluding with a multinational cartel to jack up tender costs
V D Satheesan

Congress MLA V D Satheesan on Tuesday alleged in the Assembly that KSEB officials had allowed a cartel of multinational companies to take over the Rs 10,000-crore Transgrid 2.0 project under KIIFB and colluded with them to engineer a tender excess of up to 160 per cent when not more than 10 per cent is allowed under rules.

Finance Minister T M Thomas Isaac initially agreed to look into the charges but he soon changed tack and refused to initiate an enquiry. “These allegations are baseless,” Isaac said. Neither the finance minister or Power Minister M M Mani bothered to give a point by point rebuttal of the charges made by Satheesan. Provoked, the opposition staged a walk out towards the fag end of the day's proceedings.

Satheesan's allegations related to 12 schemes worth Rs 5,000 crore taken up under the first phase of the Transgrid project. His chief objection was to what he described as the “outrageous” excess in the tender amount.

He said that the rates at which the works were granted were far in excess of the rates drawn up by the KSEB and approved by the Electricity Regulatory Commission.

Power cartel

Satheesan said the KSEB firstly ensured that only their preferred companies were in the fray. “For this, they tampered with the pre-qualification bid. They revised the conditions in such a manner that only certain companies could participate,” Satheesan said. A cartel was formed as a consequence.

For instance, to rule out a foreign bidder, he said the KSEB inserted a clause that only companies in India could participate. “This way, the competitive nature of the bidding process was compromised,” he said.

Two-stage hike

The escalation of rates was then done in two stages. Satheesan gave an example of a work in Thrissur that should have been done for Rs 130 crore if the KSEB-approved rates were adhered to. “The chief engineer gave technical sanction for Rs 210 crore, a tender excess of 60 per cent,” Satheesan said. “After this, the tender amount was raised 61.18 per cent to Rs 350 crore. What should have been carried out for Rs 130 crore was finally awarded Rs 340 crore, an increase of 160 per cent,” Satheesan said.

He gave another example of a Transgrid work in Malabar. As per the KSEB rates, the work should have been done for Rs 150 crore. After technical sanction was given for Rs 240 crore, it was further raised 54.89 per cent to Rs 372 crore. “A work that should have been done for Rs 150 crore was eventually awarded for Rs 372 crore, a 149 per cent increase,” Satheesan said.

Opposition charge KSEB and KIIFB with colluding with a multinational cartel to jack up tender costs
Power Minister M M Mani

He said this was more shocking because the tender is not just for labour contracts but also for the purchase of equipments. “The tender for equipments have been traditionally under quoted, it is only the labour contracts that exceed limits. Here, even the purchase of equipments have been excessively over quoted,” Satheesan said.

Isaac counter, Satheesan's return

The finance minister argued that the pre-qualification conditions were changed to improve competition. “Earlier, it said that companies should have an asset base of Rs 500 crore. We found that only four had applied. So we brought it down to Rs 300 crore. It is another matter that even then only the four took part,” he said.

Satheesan was quick to pounce on this. “You are misleading the house,” he said. “You give the impression that all projects were re-tendered. I have closely studied all the 13 projects and it was only in one case that the KSEB had gone for re-tender,” he said. Satheesan even alleged that officials of a particular company had sat with the KSEB officials and drawn up the tender amount.

Caught off guard, Isaac said he would look into it. But he soon turned defiant and said there were no truth to the charges.

KIIFB CEO's hypocrisy

Satheesan then repeated the earlier UDF charge that this was a gross violation of a government order issued by former finance principal secretary K M Abraham who now is the KIIFB CEO. “As per the order issued by the then finance additional chief secretary, who is now the CEO of KIIFB, a re-tender should be ordered if the lowest quoted amount in the tender process is higher than the estimated cost by 10 per cent. If the same thing is repeated even in the re-tender, the order says the estimate will have to be revised. But why is it that KSEB has not followed this,” Satheesan asked.

KIIFB's outsourcing model

Satheesan's yet another charge was that the KIIFB's appraisal wing was a white elephant. “The project appraisal CEO was getting more money that the chief secretary and he had a team under him, the members of which were also paid one to two lakh as monthly salary. The fun part is, they don't do any appraisals. They sub-contract it to Centre for Management Development, which too does not do any appraisals but further sub-contracts the work to a company called Terrenus Consulting. Such a company does not exist, it is a mere paper company,” Satheesan said.

Power Minister M M Mani, in a reply that he read out, just said that the charges were malicious and baseless. Thomas Isaac, on his part, said that Transgrid was a highly innovative project that had won the backing of the Centre. He said the innovation had even saved the state nearly Rs 4,000 crore.

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