CAG flags irregularity by NHAI as it gave ‘undue benefits’ to highway builders in 2013-14

NEW DELHI: The Comptroller and Auditor General (CAG) has flagged major irregularities of National Highways Authority of India (NHAI) giving “undue benefits” to highway builders in 2013-14 by “resorting” to amendment in contract conditions and formulating a scheme after the works were awarded and contracts were signed.
It has found that the NHAI formulated the scheme to allow the deferment of premium amounting to Rs 9,296 crore for a period of 8-14 years, for 20 projects (till October 2019). Premium is the annual upfront payment that a private highway developer pays annually, as per the contract, for the entire contract period. Highway developers quote premium in projects where they expect to get more toll revenue.
According to the auditor, the policy or scheme for rationalisation of premium was neither considered nor approved in the NHAI board meeting. It found that the NHAI granted deferment of premium after it projected that the government would lose Rs 98,115 crore, if the contracts were terminated. The CAG has said this narrative by the NHAI paved the way for this policy change despite there were other alternatives to deal with such cases within the ambit of contracts.
“The scheme was formulated on the basis of flawed presumptions,” the CAG observed. It said “Any post tender or contract amendment tantamounts to vitiating the entire tendering process, against the principle of sanctity of contracts and unfair with respect to other bidders.”
The auditor also found that while proposing the Cabinet note for the policy change, the NHAI had put up a list of 23 projects, which were awarded on premium but works could not start and these were listed as languishing projects. “Out of the 23 projects, which formed the basis for inception of this policy, 18 projects could not take off and were subsequently terminated or foreclosed while the remaining five projects, though started, were not completed till December 2019,” the CAG said.
It also flagged how the NHAI miserably failed to monitor the Escrow Account — common account managed by the private developer and NHAI in which toll revenue is deposited and is meant for use only for specific purpose. In seven out of 10 projects, the private developers regularly invested funds from the Escrow Accounts to mutual funds. “The audit could map Rs 5,304 crore which was invested in mutual funds. In addition to investment, instances of diversion of funds to other projects were also noticed,” it said.