CAG detects avoidable expenditure of Rs 156 crore in executing Saubhagya

Shillong, Sep 22: Despite advisory issued by the Cabinet Secretary, injudicious decision of MePDCL for awarding works under SAUBHAGYA to contractors at their quoted rates resulted in avoidable expenditure of 156.14 crore.

This was revealed in the report of the Comptroller And Auditor General of India for March 31,2022 tabled in the Assembly on Friday.


According to the report, the Centre launched (October 2017) the ‘Pradhan Mantri Sahaj Bijli Har Ghar Yojana SAUBHAGYA as a concurrent programme to Deen Dayal Upadhyay Gram Jyoti Yojna (DDUGJY) with an aim to ensure universal household electrification (in both rural and urban areas) by providing last mile connectivity through financial assistance to the DISCOMs/Power Department. Under the SAUBHAGYA, household electrification was envisaged to be achieved for all households in the country through two means viz., (i) providing last mile connectivity to households through grid and (ii) providing connections through stand-alone photovoltaic systems in remote and inaccessible areas not feasible to be connected with grid. The funding pattern of this scheme was in the ratio of 85:15 between the Centre and the state respectively. In Meghalaya, the MePDCL was the Project Implementing Agency (PIA) for SAUBHAGYA.

Government of Meghalaya submitted its Letter of Intent to Government of India for participation in the implementation of SAUBHAGYA in February 2018 and submitted (May 2018) a proposal/DPR worth Rs1,876.15 crore for electrification of 1,49,826 households for approval. Subsequently, the Centre sanctioned Rs 657.06 crore and released (between May 2018 and December 2022) Rs 525.30 crore for electrification of the proposed un-electrified households. In addition, the state provided Rs 148.67 crore between November 2019 and March 2022. The date of completion of SAUBHAGYA was initially fixed for December 2018, which was extended to December 2020 by the Centre due to delay in awarding of projects by MePDCL.

The CAG report says the project was completed only in March 2022 at a total cost of Rs 673.04 crore including an outstanding liability of 98.48 crore due to the contractors (March 2023). Further scrutiny showed that the works were executed in two parts ie, first, departmentally which included service connections with related infrastructure for all the 1,62,568 households at a cost of  Rs 296.44 crore and the second, through Turnkey Contractors (TKCs), scope of which included other additional infrastructure works like installation of Distribution Transformers (DTRs), 11 KV lines and LT lines costing Rs 1476.68 crore.

Scrutiny (November-December 2020) of records of MePDCL showed that for execution of the works under SAUBHAGYA, MePDCL initially planned (07 September 2018) to award the work to the already existing TKCs of DDUGJY. The TKCs of DDUGJY also agreed (10 September 2018) to execute the work of SAUBHAGYA at departmental rates subject to a few minor conditions like providing interest free mobilisation advance, revision of rates for conductors and DTRS or to be supplied departmentally, etc. However, the state decided (10 September 2018) to issue tender notice for executing the work on turnkey mode and split the work into two packages-Package A (Khasi and Jaintia Hills districts) and Package B (Garo Hills).Notice Inviting Tender (NIT) for implementation of 100 per cent household electrification and for providing last-mile connectivity under SAUBHAGYA, was floated (26 September 2018) under Package-A and Package-B with a corrigendum issued on October 9, 2018.

The bidding documents included clause 1.4 under preamble (A) of volume-1 section-II Instruction to Bidders (ITB) and clause 30.2 of Volume-1: Section-11 ITB, which stated that a bid submitted by a bidder for a particular package shall be treated as non-responsive if the total quoted price is found to be 10 per cent below or above the estimated cost of the package.

It was however noticed that the clauses ie., Clause 1.4 and Clause 30.2 were deleted (09 October 2018) by the Empowered Committee (Tender) on the ground that they may impede participation of bidders considering that the target for completion of the scheme was December 2018.

In response to the NIT, MePDCL received four bids. The Empowered Committee (Tender), after Techno-Commercial evaluation (October 2018) recommended opening of financial bids submitted by three bidders. While opening the financial bids (November 2018), one bidder did not comply with the criteria specified in the bid document.

The rates quoted by the lowest bidder were 55 per cent (Package A) and 59 per cent (Package B) above the estimated cost put to tender.

In the meantime, the Cabinet Secretary, government of India in a video conference (14 December 2018) with the Chief Secretary and other officials of GoM/MePDCL, suggested that the NIT of SAUBHAGYA scheme be cancelled, and works be taken up departmentally. The Cabinet Secretary reasoned that the rates quoted by the TKCs were above the estimated cost and issuing fresh tender will further delay completion of the project. The state concurred with the proposal and advised MePDCL to comply with the directives of the Cabinet Secretary. Despite providing assurance to the Cabinet Secretary, MePDCL went ahead with the tender and awarded (February-March 2019) the works to the TKCs, thereby extending undue financial benefit to them and resulting in avoidable expenditure.

Rural Electrification Corporation (REC) had clearly communicated (01 October 2018) to MePDCL that Standard Bid Documents (SBD) issued by the Centre may be customised as per the state’s suitability with prior approval of State Level Standing Committee headed by the Chief Secretary on principles of transparency, financial proprietary and fair competition. As such, the Empowered Committee (Tender) appointed by MePDCL’s Board of Directors did not have the authority to make such changes in the SBD. In view of the facts mentioned, the bids were liable to be declared non-responsive in terms of clause No. 1.4 under preamble (A) of volume-I: section-II Instruction to Bidders (ITB) and clause 30.2 of Volume-1: Section -II ITB.

Hence, deletion of clause No. 1.4 under preamble (A) and last para of clause 30.2 of Volume I: Section II Instruction to Bidders (ITB) by the Empowered Committee (Tender) was not only irregular and contrary to the directions given by REC but also provided undue financial benefits to the TKCs. Moreover, with the deletion of these significant clauses from the bid document, MePDCL was left with no mechanism to filter parties quoting unreasonably high rates, the report said.

In spite of the assurance given by the state to Cabinet Secretary, MePDCL negotiated (24 December 2018) the price with the contractors and both the contractors agreed to reduce their bid price by five percentage point thereby making the quotes 50 and 54 per cent above the estimated cost. MePDCL accepted the negotiated rates and issued (25 February 2019) LoA to M/s Satnam Global Infraprojects Limited for Package A at a tender value of Rs 260.04 crore and to M/s Onycon Enterprise, Mumbai (05 March 2019) for Package-B, at a tender value of Rs 275.66 crore.

In this regard, Audit carried out item-wise rate comparison of common items being executed departmentally and through TKCs. It was seen that 86 out of 95 items under ‘Supply component’ and 44 out of 54 items under ‘Erection component’ were common. However, the rates quoted by the contractors were much higher than the departmental rates resulting in avoidable expenditure of Rs 156.14 crore.

Based on the rate comparison, it is evident that MePDCL allowed exorbitantly higher rates to be charged by the TKCs and departmental execution of the 130 items mentioned could have restricted the expenditure to Rs 365.12 crore instead of Rs 521.26 crore paid to TKCs. “Thus, due to execution of SAUBHAGYA through TKCS in complete disregard to the advisory issued by the Cabinet Secretary, Gol, MePDCL had incurred avoidable expenditure to the tune of 156.14 crore”, the report said.

On this being pointed out, the state government said (March 2023) that deletion of Clause 30.2 of volume-1 Section II of ITB, was intended to allow the prospective bidders to quote their prices irrespective of any restrictions ie., to enable the prospective bidders to quote their price without compromising the quality of the work and also to enable the owner to avoid further retendering.

“The reply did not address the core issue of awarding the works despite advisory from the Cabinet Secretary which was agreed to by the Chief Secretary as well as the Additional Chief Secretary (Power)”, the CAG added

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