Wednesday 31 August 2011

Undue financial benefit given by CADC to a Contractor: CAG Report

By Tejang Chakma


The other day, as I was looking for some materials for research related work, I came across a report by Comptroller and Auditor General (CAG) of India which revealed undue financial benefit of over Rs. 3 crore given by Chakma Autonomous District Council, Mizoram to a contractor. Similar news stories are reported earlier but it appears that this news is hitherto unknown to the general public.

According to the CAG’s latest “Audit Report (Civil), Mizoram for the Year 2009-2010”, the Chakma Autonomous District Council (CADC) paid advance of Rs. 3.61 crore to a contractor from the public exchequer in violation prescribed procedures of Central Public Work Department works manual and financial rules. This has resulted in undue financial benefit to the contractor together with loss of interest.

In April 2010, scrutiny of records of the Executive Secretary, CADC by the CAG disclosed that out of the available funds of the Non Lapsable Central Pool of Resources (NLCPR) CADC in January 2008 started implementation of Project “Upgradation of Parva-I to Semensora Road in Mizoram” funded by Ministry of Development of North Eastern Region (DoNER) at the total cost of Rs. 12.26 crore. The state government released Rs. 7.56 crore to the CADC in two installments in September 2007 and May 2009 respectively along with loan component of Rs. 41.99 lakh in February 2008.

On 29 January 2008, the CADC’s Selection Committee selected an Aizawl-based contractor based on lowest tendered rates. On the next day, a work order was issued to the contractor for the execution of the work at the tendered amount of Rs. 12.02 crore specifying 18 months as the scheduled time of completion of the work. Based on the applications received from the contractor, the CADC unauthorisedly released advances of Rs. 3.61 crore (mobilization advance of Rs. 2.40 crore and advance of Rs. 1.21 crore for plant and machinery) to the contractor.

This was against the permissible advance. The CAG found that against the permissible advance of Rs. 1.80 crore (mobilization advance of Rs. 1.20 crore and Rs. 0.60 crore for advance for purchase of plant and machineries), the CADC unauthorisedly sanctioned and disbursed a total advance of Rs. 3.61 crore, which resulted in excess payment of advance of Rs. 1.81 crore with undue benefit to the contractor.

The CAG report further revealed that the mobilistion advance of Rs. 2.40 crore was released to the contractor without obtaining any bank guarantee and without incorporating any provision for realization of 10 percent simple interest in the sanction orders. This is not all. The CADC did not obtain any documents in support of purchase of new plant and machinery before releasing advance of Rs. 1.21 crore. Neither did CADC could able to produce details of deductions with regard to recovery of both the advances as of April 2010.

Consequently, the CADC failed in ensuring safeguard its interest. The CAG report revealed that the CADC could not even initiate any action to fix responsibility against the erring officials as of January 2011.

The matter was reported to the government in July 2010. In its reply in August 2010, the government stated that action was being taken with the concerned District Council. However, no further reply was submitted as of January 2011.

The CADC is not alone. The CAG also reported unauthorized diversion of recurring grants of Rs. 1.53 crore by the Lai Autonomous District Council (LADC). The unspent grant was unauthorisedly utilized towards expenditure other than salary during 2007-2008. During 2007-2008, Rs.24.52 crore was released as non-recurring grant-in-aid to the Council under Non-Plan Sector for meeting the salary component of General Secretariat (Rs. 9.72 crore) and Education Department. The grant was released with the clear stipulation that it should not be diverted for any other purpose other than for which it was allocated.

In its reply, the Council stated that they have utilized the entire fund for the purpose it was meant for. However, the claim of the Council was rejected as the Annual Accounts approved by the Council and submitted during 2007-2008 clearly reflected non-plan expenditure.  

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