CAG report is flawed, alleges Oommen Chandy

KOCHI: Former Chief Minister Oommen Chandy on Thursday said the CAG report on Vizhinjam project was flawed as its observations were made solely on the basis of the report of the Principal Accountant General (PAG).

Chandy’s 45-page statement came in response to a notice issued by the Vizhinjam Commission.
In it, Chandy alleged R Thulaseedharan Pillai, a retired senior audit officer was engaged in supporting the audit team as an external consultant.

“Prior to his appointment as consultant, Pillai wrote two articles in a Malayalam weekly on Vizhinjam port. It is surprising to note there are many unmistakable similarities between his views and the audit observations,” Chandy alleged.

He alleged the PAG report was prepared in total non-compliance with the audit guidelines complete with serious procedural lapses.

“The observation of the CAG is a result of their improper understanding of private-public-partnership projects and project finance. The concession period of 40 years was adopted from the 40- year term prescribed in the ‘Model Concession Agreement for State Ports’, which was prepared by the Planning Commission and adopted by the state for the Vizhinjam project via a Cabinet decision and a government order dated May 12, 2014,” Chandy said.

“The agreement and its conditions were vetted by the Department of Economic Affairs, Ministry of Finance. It is also misleading to measure financial gains of a private partner based on turnover or gross revenue. The audit should have also indicated the operation expenses, loan repayment, tax payment and net inflows to have a gross picture,” he said.

While indicating a revenue figure of about `29,000 crore, the PAG conveniently concealed the net inflow to the state, the  Centre and the concessionaire, Chandy  said.

“As per the same, the Ernst & Young Report, which forms the basis for calculations in CAG report, the net inflow to the state and Centre through revenue share and taxes is `7,300 crore. The net inflow to the concessionaire is `6,000 crore which is lesser than the inflow to the governments in the period,” he said.