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Frequent modifications led to cost escalation

By Our Reporter

 SHILLONG: The frequent change of governments in Meghalaya coupled with new suggestions by those who are at the helm of affairs had a cascading effect on cost escalation of the Meghalaya House at Kolkata.

Though the Asian Housing Corporation Limited (AHCL) now known as Asian Housing and Infrastructure Pvt. Limited (AHIPL) handed over the building to the State Government on August 5, questions are aplenty on how the cost of construction doubled.

The Shillong Times tried to find out the reason behind the cost escalation and found that the suggestions of politicians and officers to carry out modifications of the building before executing any supplementary agreement, resulted in the price escalation by almost 100 per cent for the construction of the residential cum commercial complex of the new Meghalaya House at Kolkata at 9 and 10 Annandilal Poddar Sarani (Russel Street).

An official document of the GAD admitted that during the course of construction, ‘several visits were made by dignitaries and senior officers of the State such as the Governor, the Chief Minister, the Minister of General Administration Department and the Chief Secretary. In course of the visits and inspections, some of the dignitaries had suggested modifications and additions which also resulted in the increase of built up plinth area.

In a sequel to the Kolkata Meghalaya House scandal of 2001, the State Government allowed modifications against the earlier agreed alignment made on May 20, 2005, as per the whims and fancies of the VVIPs and VIPs at the cost of public exchequer, which ultimately became beneficial to Asian Housing Construction Limited (AHCL), the company executing the project.

The original cost of the work pegged at Rs 22.12 crore, which was already paid to AHCL, shot up to an additional amount of Rs 24.09 crore, which was also cleared by the State Government.

Official documents reveal that whenever politicians and officers visited the Meghalaya House at Kolkata, they suggested modifications in the building at the cost of State exchequer worth several crores of rupees and the suggestions were dutifully executed by the PWD without amending the agreement which was mandatory.

It was after the execution of additional works and incurring additional expenditure that a new annexed agreement was signed in November last year with AHCL.

By allowing the extra work which resulted in price escalation, the AHCL and Government violated clause 6 (h) (xi) of the agreement signed on May 20, 2005 which said, “This agreement is subject to force majeure (natural calamities) provision of law. In the event of Government of Meghalaya requiring any additional work to be done, over and above the work specified in the schedules and annexures hitherto or requiring any deviation from those specified herein, AHCL shall carry out such additional or deviation work on payment of such additional amount as may be specified in supplementary agreements. However, the AHCL will carry out ancillary works necessary for the completion of the building”.

But, in the case of the State House, the AHCL continued to carry on with the modification works based on suggestions from VVIPS and VIPs and it was only after incurring additional expenditure worth several crores of rupees that the AHCL sought reimbursement from the Government.

Moreover, after a delay of several years, it was only in November last year, as an afterthought, that a supplementary  agreement was signed between the Government and AHCL subsequent to carrying out of additional works which resulted in the double expenditure.

If the deal with AHCL had led to the downfall of the EK Mawlong-led Government in 2001 for the reason that undue benefits were given to the company in the joint venture mode and also in lease period (100 years), there is not much difference this time too as the man made price escalation has benefitted the company the most since the company is getting over Rs 24 crore in addition to the previously agreed sum of Rs 22.12 crore.

After the first deal was scrapped during Mawlong’s tenure, it was an out of court settlement and a subsequent agreement which limited the amount to Rs 22.12 crore in 2005.

During the out of court settlement in 2003, the firm had put two conditions, either to pay monetary compensation of Rs 43.29 crore or to allot the construction work as turn-key contractor.

The State Government, in 2005, chose the second option and engaged AHCL as the turn key contractor by allotting the firm a lump-sum amount of Rs 22.12 crore for the construction of the building (built up area 1,29,000 sq ft) with a deadline to complete the work within 30 months.

The irony is that AHCL’s original proposal of monetary compensation of Rs 43.29 crore made as an out of court settlement in 2003 became a reality in 2013 with the firm getting a whopping Rs 46.21 crore (Rs 22.12 crore plus Rs 24.09 crore).

The explanation of the GAD is that visits of several dignitaries to the construction site resulted in price escalation and increase in area of construction after they suggested modifications.

The Planning department, however, questioned GAD on the revised estimate making a query on whether it had taken due diligence while looking at the request of the contractor for additional payment.

According to the Planning department, the matter is not a routine case of revision of estimates permissible under the set rules and procedure , but an additional claim made by the contractor over and above the negotiated out of court settlement and agreement.

The GAD agreed that ‘under ideal conditions, the work should have proceeded as set down exactly in the agreement and be completed within the agreed amount. However, practical conditions on ground neither were ideal nor were the agreement a fool proof document which could have foreseen many factors which actually vitiated and delayed the works during the implementation’.

The GAD, however, justified that ‘the farsighted framers of the agreement kept a clause to enter into a supplementary agreement with AHCL’.

The GAD also admitted that one of the most important factors leading to the increased expenditure was the fact that ‘a number of dignitaries had visited the site at various points of time during construction and in the course of the visits and inspections, some of the dignitaries had suggested modifications and additions. Additional works were carried out to give effect to the modifications and additions, which also resulted in the increase of built up plinth area and finally leading to increase in the cost of construction’.

The Finance department also wanted the GAD to come out clear on the factor(s) leading to the huge revised estimates along with comparative statements.

The report of the Independent Technical Committee, which was setup by the Government to find out the reason behind the price escalation, did not throw much light on the actual reason and moreover, the Committee consisted of only engineers of the Meghalaya Government and not independent members. The Committee went on to the extent of justifying the price escalation. In its observation, the GAD, while recollecting the visit of the dignitaries to the site and their suggestions of modifications resulting in the price escalation, said, “It was not a total surprise when the contractor submitted a revised estimate”.

It took eight years to construct the new Meghalaya House. Though the key of the building was handed over to the Government by the firm on August 5, the work will continue till October after which the Government will finally inaugurate the building. The hurdle for the completion of the building is that the firm has to construct an additional sewerage as demanded by the Kolkata Municipal Corporation and for this the Government has proposed allotment of an additional amount of Rs 49 lakh from the State exchequer.

Sources said that an independent high level probe is the need of the hour to ascertain the circumstances which led to the price escalation in the Meghalaya House project.

 Case history

It was the United Democratic Party-led government under the leadership of then Chief Minister EK Mawlong which had in 2001 entered into a joint venture deal with the Asian Housing Construction Company Limited (AHCL) to construct a new Meghalaya House at 9/10 Russell Street, Kolkata.

The NGOs under the banner of the now defunct People’s Rally Against Corruption (PRAC) and the Opposition parties had alleged that the joint venture deal was a total sell out as it had favoured the private company the most. The lease period for the commercial complex to be constructed and operated by AHCL was almost 100 years.

Even after Malwong scrapped the controversial deal after bowing to public pressure, the Opposition members, his own Cabinet colleagues and the NGOs had asked him to resign taking moral responsibility. Mawlong Government ultimately fell in December 2001.

The next NCP-Congress government instituted a Judicial inquiry into the scam, but after the NGOs did not file affidavits, it was scrapped by the Government.

The Government then decided to hand over the case to the CBI and even wrote letters to the Union Ministry of Personnel from 2002, but in vain.

Later, Mawlong filed a case in the erstwhile Shillong Bench of the Gauhati High Court, which in an order in January 2008 had asked the State Government not to pursue the CBI inquiry by saying that undue harassment was done to Mawlong since the Government had dragged the matters related to the probe.

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