Pungrain dumped model okayed by Badal cabinet for one that ‘profited’ pvt players

INVESTORS SAY GOVT HAS LEFT THEM IN THE LURCH AFTER THEY TOOK BANK GUARANTEES RUNNING INTO CRORES; SEEK CBI INQUIRY

CHANDIGARH : The Punjab State Grains Procurement Corporation (Pungrain), which has issued termination notices to successful bidders of steel silos at 25 sites, was not only in a hurry to ink pacts with the private players, but the corporation also breached the privilege of the state cabinet by seeking sanction for one model and floating tenders for another. The agreements were signed after the state polls in February last year and before results were to be out on March 11.

The corporation in its recent note to the government on termination of contracts has said the approval to build silos was taken on design, build, operate and transfer (DBOT) model during the previous Parkash Singh Badal regime in cabinet meetings held on September 10, 2015 and February 25, 2016. The cabinet sub-committee too had recommended the same. But the contracts were awarded on design, build, operate and own (DBOO) basis for 26 sites.

The 2017 report of the comptroller and auditor general of India (CAG) on public sector undertakings was the first to raise objections to it, saying it was done without obtaining any approval for deviating from the government policy.

"After calling tenders for 15.5 lakh metric tonnes, Pungrain awarded only two silos on DBOT model (one lakh MT) and 26 silos on DBOO model (14.50 lakh MT). The eligibility criteria under DBOT model was more stringent than those under DBOO and eight ineligible bidders were awarded 14 silos under the DBOO model, none of whom would have been eligible under the DBOT model," it said.

The auditor also pointed out how the DBOT model profited the bidder at the expense of the state. "The storage rate given to concessionaires under the DBOO model (rate is paid by Central Warehousing Corporation) was higher than that under the DBOT model (rate is paid by Food Corporation of India) by 35 per cent to 57 per cent.

There was no basis for the decision to extend higher storage rates to silos constructed under DBOO vis-à-vis DBOT model," it added.

The CAG also dismissed the Punjgrain management's argument that it opted for DBOO model due to non-availability of land, saying it never put this on record. It had asked why no feasibility study for DBOO model was done, to which the management’s reply was “to avoid additional cost”.

The auditor's report rubbished it saying ₹15 lakh payment to a consultant for feasibility report for silos entailing a total project cost of ₹787 crore under DBOO model was by no way a cost not worth bearing.

It found 14 silos under DBOO model were allowed on single bids and three bidders to whom seven silos of 50,000 MT each were allotted under DBOO model did not possess the experience and threshold technical capacity.

INVESTORS STARE AT LOSSES

While Pungrain has forfeited ₹25 lakh security deposit of the 14 contracts terminated in August this year, the investors whose contracts at 11 sites have been cancelled in September accuse it of leaving them "bankrupt".

"We are ready to accept lower rentals to cut government expense on storage costs. We have acquired land and started construction on the site. I submitted bank guarantee of ₹2.72 crore. The construction was started after joint inspection by Pungrain and FCI. Our pact was with the government. As investors, can we be held accountable for change of regimes or whether the agreement was signed after state polls and before results? We got all approvals under the 'Invest Punjab' scheme. Is this Punjab's message to investors," Sanjeev Chadha, whose firm Baba Naga Overseas' contract was terminated at Batala, said.

Chadha says each of the 11 investors whose contracts have been terminated in September have made investment between ₹10 to ₹15 crore. Denying the reason cited by Pungrain for nulling the contract — that his firm did not have title of land — he said, "Will a bank stand guarantee for a project which has not bought land. The FCI has asked Pungrain to move proposal for sites already constructed or ready for construction. Yet the corporation has cancelled our sites. Pungrain is claiming that we did not fulfil conditions whereas it did not appoint independent expert as per the guidelines set by it."