Part II: The Scam
In Part I of this report, “Corruption in India: A Case Study”, I introduced the major players involved in this story: Subhash Projects & Marketing Limited (SPML), an engineering, construction and project management company, and C.S. Khairwal, Chief Secretary, Government of Pondicherry. In this post, I will outline the gross neglect of Government procedures and regulations and the cronyism and corruption that paves every step of the Pondicherry (now Puducherry) port development process.
- Tender for consultants for a feasibility study. I mentioned in my previous entry that SPML submitted a proposal to undertake a feasibility study for the port project and was rejected for lack of experience. No feasibility study was conducted.
- The Port Director for Pondicherry was transferred for asking too many questions.
- The National Institute of Port Management, official consultant to the Government of Pondicherry, was dumped halfway through their contract for delivering unfavorable findings.
- There was no tender for the port development. DS Constructions was initially selected unilaterally.
- Mr. Rumneek Bawa, CEO of DS Constructions, joins Subhash Projects. SPML is then awarded the port development contract.
- C.S. Khairwal is involved in a hastily awarded concessional agreementwith SPML, by-passing procedural norms. (Mr. Rumneek Bawa stays at C.S. Khairwal’s house when in Pondicherry.)
Who benefits from the port? By Emanuele
SMPL Wins; Pondicherry Loses
The Memorandum of Understanding (MoU) between the Government of Pondicherry and SPML is outrageous.
- 400 acres of prime property (beachfront!) is handed over to SPML at a lease of Rs. 2000/acre/year. To give you an idea of how ridiculous this price is, in 2002, the Department of Industries & Commerce, Pondicherry, offered subsidies to encourage entrepreneurship by women and members of Scheduled Caste and Scheduled Tribes at a ceiling of Rs. 5000/month for starting industries in rented buildings. Obviously the comparison is not parallel, but I think you get the picture.
- The leased land can be sold by SPML in ten (10) years at the prevailing market rates. Market rate today is Rs. 5000/square foot.
- Revenue sharing of only 2.6% of profits with the Government of Pondicherry. The norm is 30% of revenue.
- The Government is to buy back the port in 50 years at prevailing market rates.
- SPML will make no investment in the project. They will raise funds by mortgaging the leased land and floating shares. (Early this month, the SPML Board approved an issue of securities – just after their debarrment from the Securities Exchange expired – to qualified institutional buyers for an aggregate amount not to exceed $100 million.)
- All clearances and licenses are mandated by the MoU.
- All mitigation measures (for pollution, environmental degradation, etc.) are the responsibility of the Government of Pondicherry.
Next: Part III – Port a Cover-up for Real Estate Development