Monday, June 4, 2012

Montek's doubtful games on Rail and Road

[These two articles appeared on 'The Pioneer' on March 19 & 21, 2012]

US loco giant pits Montek against planners

March 19, 2012

In the midst of political turmoil over the railway fare hike, an intense fight is going on in higher echelons of bureaucracy over the selection of bidders for two locomotive factories that then Railway Minister Lalu Prasad Yadav had announced for his parliamentary constituency in Bihar in 2009. In the 2009 Railway Budget, Lalu had announced setting up of one electric locomotive factory at Madhepura and another diesel loco factory in Marhowra on PPP model.

The process of selection of bidders has pitched two key Ministries — Railways and Finance — against the Planning Commission. Top officials of Railway Board and Finance Ministry have objected to the proposals of Plan panel to change the Cabinet-approved bidding process and supply conditions for these two pending projects, which have reached nowhere in three years.

The official communication and file notings available with The Pioneer show that top officials of Railway Board and Finance Ministry protested over the changing of the Cabinet decisions to favour certain bidders by Plan panel deputy chairman Montek Singh Ahluwalia’s Advisor Gajendra Haldea. For executing the bidding process, the Cabinet in 2009 formed an Empowered Committee consisting of officials drawn from Railway Board, Finance Ministry and Planning Commission. The controversies started when Haldea mooted some changes last year in the Cabinet-approved proposal.

In case of Madhepura project, senior officials of the Railway Board and Finance Ministry noted down that the minutes of the meeting were also “changed” and “misquoted” to propose major changes in the bidding documents to favour the US giant, General Electric.

In a series of communications between the Empowered Committee members, Finance Ministry and Railway Board officials have stated that Haldea’s proposal to change the Cabinet approved bidding procedures and supply conditions would place an extra burden of more than Rs16,405 crore.

Sources told The Pioneer, in several meetings of the empowered group, heated exchanges took place and some members alleged that these changes were introduced to suit General Electric — the lone bidder for the project. In the bidding process of Marhowra project also, top officials of the Railways and Finance Ministries protested Haldea’s high-handedness. “Haldea apparently thinks that India is a Banana Republic that can be forced to accept a con game….,” noted Sanjiv Handa Member (Mechanical) of Railway Board in a note seen by the Railway Board Chairman.

In the same note, Additional Member (Production Unit) SK Sharma of the Railways wrote that “it is unfortunate that professionalism, probity and regard for highest standards of integrity of the mechanical directorate are being questioned by resorting to sensationalism, misinformation and slander, rather than reasoned debate. It is for the investigators to determine whether this was part of a larger agenda aimed at compromising the Indian Railways interest.”

The Finance Ministry officials also expressed displeasure on changing of Cabinet-approved bidding and supply conditions. A Railway Board note of June 28, 2011 read, “Economic Affairs Secretary R Gopalan specifically asked financial commissioner the decisions of the Empowered Committee at the behest of the bidders will need to be seen with regard to their financial aspects so as to ensure that gaming by the bidders is ruled out and Railways interest will not be compromised. The minutes do not include these concerns of the Secretary, Economic Affairs.”

In a communication to Montek on February 9, Planning Commission Member Secretary Sudha Pillai questioned the authority of Haldea for approving the changed proposals, which he himself mooted. “Subsequently, several amendments that were proposed to the terms approved by the Cabinet were also admittedly authored by him. These proposals altering the terms of the proposed contracts in significant ways were quickly endorsed by the Infrastructure Division (headed by Haldea), bypassing me on some occasions.

“However, these amendments when subjected to detailed discussion and scrutiny by the Empowered Committee were found to have serious implications which had not been adequately addressed. It was clear that these amendments were not subjected to independent and impartial scrutiny. This created a very embarrassing situation for me as a member of the Empowered Committee,” said Sudha Pillai in a communication to Montek.

Plan panel tweaks toll to favour developer

March 21, 2012

Ignoring the directions of Supreme Court’s Monitoring Committee and overruling strong objections from Planning Commission Members, the plan panel has approved a 1.5-time increase in toll rates for Eastern Peripheral Expressway. This increase was proposed by CP Joshi, Minister for Road Transport and Highways, and the proposal was mooted by Deputy Chairman of the Planning Commission Montek Singh Ahluwalia’s advisor Gajendra Haldea.

The documents available with The Pioneer show that on several occasions, NHAI (National Highway Authority of India) officials objected to the proposal to increase EPE toll rates and said it was an attempt to help the developer of Western Peripheral Expressway (WPE), whose toll rates were less. The decision to create these two expressways followed a Supreme Court order in 1984 on a Public Interest Litigation on heavy traffic congestion and frequent road accidents in Delhi.

The WPE starts from Kundli and via Manesar, it reaches Palwal. The EPE too starts from Kundli and via Bagpat, Gaziabad and Noida, it reaches Palwal. Both expressways meant to de-congest Delhi have equal length of 135 km and were decided to be constructed on Build Operate Transfer (BOT) system.

The implementing agency of WPE, also known as KMP (Kundli-Manesar-Palwal) is the Haryana Government-run HSIIDC. The developer of this expressway is DSC Limited, owned by HS Narula and MS Narula. The construction started on 2007 and was supposed to be completed by 2010. But till date only 60 per cent of work has been completed, and it may take three more years for fruition. The toll rate of a car fixed for WPE is Rs 170.

The EPE’s implementing agency is Central Government’s NHAI. The project is still on paper and even bidding process has not started. Ignoring the direction of the Supreme Court-appointed Monitoring Committee, the new toll policy, which came into existence in 2008, raised the toll rate of EPE for cars to Rs 230. NHAI officials and Finance Ministry on several notes observed that the toll rates of the WPE and EPE should be equal.

“The toll rates of WPE and EPE should be kept at par to ensure that there is no diversion of traffic along WPE. Higher toll rates of EPE will lead to diversion of traffic towards WPE resulting in non-viability of the project and undue benefit to the concessionaire (DSC Limited) of WPE,” said an NHAI communication to Ministry on December 3, 2010, citing the direction of the SC’s monitoring committee.

One year ago Montek’s advisor Gajendra Haldea, who rules the roost in the powerful Infrastructure Division, mooted the proposal to the Road Transport and Highways to treat the EPE as a bypass. This was a clever ploy by Haldea, because as per the new toll policy, toll rates for a bypass can be 1.5-times higher than expressways. Sources say, after CP Joshi became the Minister of Road Transport and Highways, this proposal gained momentum. Several engineers objected to this proposal and said EPE was a new expressway and a 135-kilometre road could never be treated as bypass.

Treating the EPE as a bypass and increasing the toll rate 1.5 times would cost a car Rs 340 to cross the EPE, while the WPE, which has equal length, has only Rs 170 as toll for the same vehicle. This would lead to two situations. First, all the traffic would divert to WPE. Second, no bidder would come for construction of EPE, and give complete traffic monopoly to WPE. Strongly objecting to this dubious proposal, which clearly intends to favour the developer of WPE, Planning Commission Member BK Chaturvedi wrote to Montek that this proposal should go to Cabinet Committee on Infrastructure (CCI) for approval.

“If the PPPAC (Public Private Partnership Appraisal Committee) are to be overturned and matters which are delegated to it are to go to Cabinet afresh, we might as well abolish the PPAC….if higher toll rates are charged, naturally the bids will be better. But to that extent, people will be taxed more. There is also the worry that its usage may get limited and the purpose of making the bypass may not fulfilled.

“In view of above, I do not agree with the proposal in principle to review any decision of the PPPAC unless there is mala fides intension in it. I find none in the instant case. I feel that the project has already been delayed and we should go ahead with the current process,” said Chaturvedi on February 1, 2012.

Agreeing with Chaturvedi’s observations, Commission’s Member Secretary Sudha Pillai in a note to Montek on the very next day blamed Haldea for misquoting her. “I must also place on record my objection to the statement at para 9 of the note of Advisor to DCH (Haldea)…that I have supported the higher rate of 1.5 times. ….imposition of a higher toll rate will be contrary to Government policy and will not be in public interest…..The EPE is not a bypass but an Expressway….the draft OM (Office Memorandum) placed below is premature and full of wrong reasoning,” she wrote.

But after 11 days, ignoring the views of Finance Ministry officials and NHAI engineers and overruling the objections of his colleagues, Montek approved the dubious proposal mooted by Haldea to increase the toll rate of EPE, which would help the developer of WPE.

However Minister RTH (CP Joshi) has decided to take a different view which he is entitled to do. PPAC is an official level committee and Minister is not bound by it in going back to the Cabinet…..I feel we should apply the relevant rule, but we have to leave it to the Ministry to decide whether it is indeed a bypass.

“The Ministry has proposed treating it as a bypass and applies the relevant rule. Planning Commission concurs with the proposal,” wrote Montek on February 13, 2012, giving green signal to increase the toll rate of EPE. This literally makes EPE non-viable and offers a bumper bonanza to DSC Limited, the developer of Western Peripheral Expressway.

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