Title - Delhi airport Metro link operator got 'undue benefits': CAG

NEW DELHI: The Comptroller and Auditor General (CAG) has said that there were serious irregularities, flouting of government norms and undue financial benefits to the private player in the Delhi airport Metro link.The country's first Metro rail project under the public-private partnership (PPP) model - Delhi Airport Metro Express Line (DAMPEL) - has been riddled with concessions to DAMPEL, the joint venture between Reliance Infrastructure and Construccionesy Auxiliar de Ferrocarriles, SA (CAF) of Spain, CAG has said in a draft report.Financially, the two most serious charges raised in the CAG report pertain to alleged "undue benefits" on waived customs duty and investment of funds from an escrow account for the project to various Reliance ADAG group mutual funds without proper disclosure.The CAG has revealed that DAMEPL got customs duty concessions on imports of capital goods worth Rs 990 crore on the basis of a recommendation letter from DMRC. According to CAG, this waiver should not have been extended to DAMEPL and was applicable only if the items were imported for DMRC itself and would ultimately be owned by it. This undue benefit, CAG estimates, amounted to Rs 29.56 crore.The report also says that the concessionaire released Rs 285.43 crore from the escrow account to "various subsidiaries of M/s Reliance Infra Limited" and DAMEPL had not given any disclosure about any of these transactions being with a "related party".

The report says that the company should have been penalized for the non-completion of two of its proposed stations - Dhaula Kuan and Aero City, before the scheduled deadline. According to the agreement, the company had to finish the undertaken project within 90 days of the provisional completion certificate. For this also, the company has not been asked to pay penalty which would amount to Rs 1.66 crore. Delhi Metro has, on the other hand, incurred losses of Rs 2.25 crore due to the unfinished project.

The violations, according to CAG, started from the very genesis of the project. According to the report, while the Centre had mandated that all infrastructure projects on PPP mode costing over Rs 100 crore would have to be appraised by the PPP Appraisal Committee (PPPAC), this project was not routed through the committee despite an estimated cost of over Rs 3,000 crore.

Pointing out another "violation of its own guidelines" by the government, CAG has found that the project was approved with DAMEPL having to contribute only 46.17% of the project cost through its equity and debt and the government funding the rest. This despite the fact that norms set by the finance ministry allowed for only 40% government assistance to make a project viable.

The report points out that though the PPP route was chosen for the project on the grounds that this would enable it to be completed before the Commonwealth Games in 2010, the line actually became operational upto the Indira Gandhi International Airport (IGIA) five months after the Games.The report goes on to point out that while the Union urban development ministry had approved a debt -equity ratio of 7:3 for the concessionaire, between 2009 and 2012 the ratio was 4,3218:1, 230,907:1 and 275,205:1 for the three financial years. Strangely, when this was pointed out, DMRC argued that it was for the senior lender to monitor these details, according to CAG.Asked for comments on the draft report, a DAMEPL spokesperson said it should be more appropriate for DMRC and the urban development ministry to respond since "the said draft report is available with them and not with us" and also that things should be seen in the context of the fact that this was a project awarded through competitive bidding and not on a cost-plus basis.The spokesperson, however, did respond to some of the specific charges by CAG. For instance, on the customs duty issue, he said the imports were under a project import licence registration which was "a perfectly bonafide and legitimate way to import items required for certain specified project, which includes MRTS and urban monorail projects". He pointed out that for registration under this scheme, a recommendation letter from the appropriate sponsoring ministry/department is needed, which in this case happened to be DMRC.

"We fail to even understand what is the contention! Even for our Mumbai Metro Project, MMRDA has issued such a recommendation letter, and we are importing necessary equipment under project import scheme. There are hundreds of qualifying projects in the country which are availing of such project import duties, which are only slightly lower than merit duty," he said.

On the investments from the escrow account, DAMEPL said that under the agreement, investments into MFS investing in debt instruments with Crisil Rating of AA or higher were allowed and that the funds specified in the CAG report all met this requirement.

As for disclosing that investments were made in "related party" funds, the spokesperson said, "we most emphatically state that the company in question is neither a subsidiary of Reliance Infra, nor a subsidiary of DAMEPL, and we also confirm that no 'related party disclosures' are mandated in this case".

On the debt-equity norms, he said, "the concession agreement does not specify debt-equity ratio, and the lenders' documentation recognises sub-debt also as promoters' contribution. The funding structure of the project has been fully compliant with both the concession agreement and the lenders' documentation."