SNC Lavalin scandal
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The SNC Lavalin scandal is financial scam related to the contracting of the Indian government with a Canadian company, SNC-Lavalin which resulted in an alleged net loss to the exchequer of 374.50 crore in the renovation and modernization works of the hydro electric power stations at Pallivasal (37.5 mW), Sengulam (48 mW) and Panniar (30 mW) - also known as PSP project in short - installed between 1940 and 1964 at Idukki district in Kerala state of India. Several politicians were involved and eventually charged, including former ministers G. Karthikeyan of Indian National Congress, Pinarayi Vijayan.the first Politburo member in the CPI(M) history to be prosecuted in a corruption case. On 5 November 2013, Pinarayi Vijayan and 6 other accused were discharged from the list of accused by a CBI Special Court holding that the charge-sheet filed by CBI was not legally maintainable.
In 1992, the Central Electricity Authority (CEA) of India rejected a proposal of Kerala State Electricity Board (KSEB) to renovate the three hydro-electric power projects at Pallivasal, Sengulam and Panniar instead the CEA recommended a capacity upgradation of the generators in these three power projects, after they found that these projects are in good condition. KSEB disregarded this recommendation and went forward with the decision to renovate these projects.
The initial negotiations with the Canadian company SNC-Lavalin - a company which had been present in the state's power sector for several decades - began during the tenure of United Democratic Front government, under the leadership of the then power minister C.V. Padmarajan and later, the Kerala State Electricity Board (KSEB) signed a memorandum of understanding (MoU) with SNC-Lavalin on 10 August 1995, when G. Karthikeyan of the Congress Party was the power minister, after the resignation of C.V. Padmarajan. Under the provisions of the MoU, the funds for the renovation were to be arranged by SNC Lavalin from the Export Development Canada (EDC), Canada, and the Canadian International Development Agency (CIDA). Later, it was also found out in a probe by CBI, that G. Karthikeyan also wanted a quid-pro-quo assistance from the Canadian government for the setting up a hospital for granting a project for refurbishment of Pallivasal, Shengulam and Panniyar Hydro electric stations in Kerala, after the revelation of a letter by G Karthikeyan to the then vice-president of Lavalin business operations, Klaus Triendl, who is also an accused in the Lavalin scandal. It was only in September 1995, that the KSEB undertook a feasibility study on the proposal, by a retired Chief Engineer of the KSEB, who later became a consultant to SNC-Lavalin. During 1992-94 cost of 1 MW power was around one core (source Tata electric Co ), During the press conference as a minister of electricity Vijayan justified awarding Rs 374 cores for a 100MW, project without tender , by saying Lavelin will provide a grand of Rs 100 cores for Malabar cancer institute Evidence of the press conference still available with T V channels Now cost of new power per megawatt is more than 20 cores ,that means Kerala has lost Rs 5000 cores
Based on the consultant's report and further discussions, the KSEB under the leadership of G. Karthikeyan, signed the contracts with SNC-Lavalin to provide technical services for management, engineering, procurement and construction supervision on 24 February 1996, to ensure completion of the projects within three years. The consultancy agreement did actually include the rates for various equipments to be purchased as part of the project. Consultancy agreements were converted into fixed price contracts for the supply of machinery and technical services as part of the renovation at a cost of 67.94 million Canadian dollars (Rs 169.03 crores). The final follow-up agreement with SNC-Lavalin regarding the renovation of PSP project was signed by Pinarayi Vijayan of Left Democratic Front - after they took office winning the majority in legislative assembly in 1996 - in February 1997. Technically, the Left Democratic Front (Kerala) led government could not retreat from the agreements, even if they wanted to, according to the provisions of the MoU which was already signed by their predecessors, that is the ministers of United Democratic Front government.
After the final contract was signed, the KSEB entrusted the National Hydroelectric Power Corporation Limited (NHEPCL) a study to justify the prices quoted by Lavalin, and they concluded in that study that in view of the grant to the proposed Malabar Cancer Centre (MCC), the purchase of Canadian equipment and accessories could be considered favorably.
The CAG found that Lavalin was only a consultant intermediary and not the original equipment manufacturer and that the supply of goods and services was made by other firms at a much higher cost leading to excess expenditure. According to the CAG, the absence of due professional care in negotiating the foreign loan proved to be detrimental to the financial interests of the Board. The Board also could not ensure the quality of renovation work in the absence of technology transfer and training of its engineers. Owing to various technical defects in the equipment, the generation of power could not be maintained even at the pre-renovation level and the Board had to spend on repairs.
According to the CAG, failure to exclude the fee for technical consultancy from fixed price contracts resulted in an avoidable payment of Rs 20.31 crores, and failure to negotiate and exclude the exposure fee from the loan agreement resulted in avoidable payment of Rs 9.48 crores and future liability of Rs 2.21 crores. In the opinion of the CAG, there was also an avoidable payment of Rs 1.20 crores as commitment fee despite there being committed but unavailed advance.
The CAG found that the Government did not receive Rs 89.32 crores out of the grant of Rs 98.30 crores that was promised for the Malabar Cancer Centre as the MoU was not renewed in time during the tenure of United Democratic Front when Kadavoor Sivadasan was the minister in charge of power.
On February 18, 2008, the CBI informed High court of Kerala that the investigation was progressing and said that former Electricity Ministers Pinarayi Vijayan and G. Karthikeyan would be examined at the appropriate time.
On 2 February 2009, the CBI wrote a letter to the Governor of Kerala, seeking sanction for the prosecution of Pinarayi Vijayan under section 197 of the CrPC, who later referred it to the cabinet .
On 6 May 2009, the Cabinet opined that it was not necessary to grant permission to prosecute Pinarayi Vijayan.
On 31 August 2011, the Supreme Court of India issued notices to Government of Kerala and the CBI, on a petition filed by Pinarayi Vjayan, challenging the then Kerala Governor, R.S. Gavai's nod to prosecute the former, over-riding the decision of the council of ministers, after he wrongly assumed that he had jurisdiction and power to grant sanction on his own. The proceedings against Pinarayi Vijayan initiated in the special court was stayed by this order.
Pinarayi Vijayan Discharged
On a petition seeking discharge from the case before the CBI Special Court Thiruvananthapuram, Pinarayi Vijayan and the other accused were discharged from the case on 5 November 2013. The court said that the CBI had failed to prove the charges of conspiracy and cheating against the seven petitioners who had sought the discharge and that it had no hesitation in holding that the allegations against them were “groundless”. The prosecution had failed to establish any dishonest and fraudulent intention, abuse of official position, or element of cheating, which the accused were charged with, Special Judge R. Raghu said in a much-awaited judgment.
The Special Court judge said that the prosecution had not made case that any of the accused gained undue pecuniary advantage by awarding the contract to SNC-Lavalin. It had, on the other hand, attempted to pose two “contradictory and mutually destructive” allegations: one, that the act of awarding the contract to the company was “dishonest” and “fraudulent”; and two, that the consideration for awarding the contract was the offer of a grant to establish the cancer hospital, which was, in fact, a laudable objective involving the public interest. The court said the only question that remained for consideration in the case was whether there was any “administrative failure or blunder” that took place “without understanding the ramifications of the offer of grant” from various Canadian agencies in return for the award of the supply contract to SNC-Lavalin.
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