KLIS a Cesspool of Corruption: CAG Finds Excess Payments of Minimum of Rs.7,500 Cr

Hyderabad: High-profile Megha Engineering and Infrastructure Limited (MEIL) has allegedly pocketed thousands of crores of rupees of public money in the ill-famed Kaleshwaram Lift Irrigation Scheme (KLIS), thanks to the patronage it enjoyed from the previous Bharat Rashtra Samithi (BRS) government.

According to the draft performance audit report on KLIS by the Comptroller and Auditor General (CAG), the company was paid an excess of Rs.5,188.43 crore in just four packages, involving the supply and commissioning of pumps, motors and auxiliary equipment.

The amount is likely to be much more as there were 17 more such packages. While works in four of 17 packages were still under progress at the time of the audit in 2022, the BRS government did not provide invoices for 13 packages to the auditing agency, without which it could not arrive at the excess payments made to the contractors.

The Congress and Bharatiya Janata Party (BJP) alleged that the ‘Bahubali’ project of KLIS was a cesspool of corruption, which, they said, turned into an ATM for former chief minister K. Chandrashekar Rao.

Giving strength to these allegations, the CAG, within the limited opportunity it got to audit the controversial project, established that contractors like MEIL, L&T and Navayuga were extended undue benefits of at least Rs.7,500 crore.

The CAG said L&T was paid an excess of Rs.66.29 crore in road construction, Rs.29.01 crore towards dewatering charges and Rs.26.46 crore for the additional lead for procurement of metal in Medigadda Barrage that sank recently.

The audit report also clearly established that the cost of KLIS would cross Rs.1.5 lakh crore, against the BRS’ claims that the total outlay of the project itself was Rs.80,000 crore and a full study of the expenditure would provide an enhanced figure of undue payments made to contractors.

“The way the administration, from top to bottom, doled out benefits to contractors obviously after receiving kickbacks leaves one wonder if the government can indulge in such gross and glaring irregularities and get away with it,” a retired engineering official said.

The siphoning of public funds was done in several ways, including price adjustments, loading excess quantities in estimates and more importantly, not reducing the estimate even after reducing the scope of work.

The CAG found that then government obtained price estimates for pumps, motors and auxiliary equipment from the Public Sector Undertaking Bharat Heavy Electricals Limited in 2008, but the BRS government prepared the estimates based on inputs provided by the irrigation adviser and that the irrigation department had no clue on how the price was arrived at.

As a result, the contractor took advantage and paid Rs.1,686 crore to BHEL for the equipment, against the inflated estimate price of Rs.7,214 crore. Even after factoring in 20 per cent profit against the permitted 13 per cent, the contractor still was extended undue benefit of Rs.5,188.43 crore, the CAG pointed out.

The government, according to CAG, allowed price adjustments (in the event of changes in rupee value in the international market) for electro-mechanical and hydro-mechanical equipment to the successful bidder, although it outright rejected such requests in the pre-bid meetings.

The CAG put the excess payments made in the form of price adjustments at Rs.1,343 crore.

In Package 18, the government reduced the length of the tunnel and corresponding works but it did not bring down the estimated price, resulting in an undue benefit of Rs.94.32 crore to the contractor.

Similarly, in Package 17 audit tunnel works, the contractor got an excess payment of Rs.50 crore.

In Package 9, additional survey charges of Rs.48 crore were paid to the contractor.

For the pressured pipe irrigation system in Package 21A, the contractor was paid Rs.21 crore towards excavation and disposal of soil at identified spots one kilometre away from the pipeline. However, the CAG found that the pipe laid was too small that it did not require excavation and transportation of soil at all.

In Package 16, the length of the canal was reduced from 89 km to 57 km, but the government paid for 89 km, because of which the contractor got the undue benefit of Rs.117 crore.

In Package 12 of Link IV, the CAG concluded that the actual requirement of steel quantities used in tunnel construction would be 182 MT but it was shown as 13,048 MT in the estimates, because of which the contractor got an additional payment of Rs.64.98 crore.

In Package 15, the value of additional works was inflated by Rs.58 crore, said the CAG.