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A Deal’s Darker Blush

A Deal’s Darker Blush

The Coal India CEO’s arbitrary appointment of a private consultancy firm shows how ossified attitudes still rule the PSU roost, says NEHA DIXIT

THREE MONTHS ago, it won the Dalal Street Journal’s PSU award for being the world’s largest coal producing company, because of its 400 million tonne output. What wasn’t highlighted at the award function was that there is a CBI enquiry against Coal India Ltd (CIL) Chairman Partha S Bhattacharyya over the awarding of a consultancy contract without tenders, in contravention of Central Vigilance Commission (CVC) directives.

At a board meeting in December 2007, Bhattacharyya placed a proposal for the appointment of CRISIL Infrastructure Advisory to prepare norms and standards for future coal utilities. The problem: the appointment was on a nomination basis, against directives issued by the CVC in a circular on July 3, 2007. The circular said bids had to be invited through public tenders, after advertisements were places in newspapers.

Unaware of the CVC’s directive, the proposal was approved by the board and CRISIL was hired at a cost of Rs 1.27 crore (TEHELKA has a copy of the contract). Its job was to prepare norms for units that were due to come up, with regard to the 34 upcoming power stations to which CIL had issued Letters of Assurance (LoAs). CRISIL was to rate the units on the basis of meeting milestones set for the individual consumer units.

Apart from CVC directives, the appointment also violates a 2006 Supreme Court order that ruled that contracts awarded on nomination basis are against the provisions of Article 14 of the Constitution of India (according to Article 14, contracts can only be awarded through public auction and by tender invitation to ensure transparency).

Worse, CRISIL Infrastructure and Advisory was awarded the contract at an arbitrary rate, without ascertaining market rates. For instance, firms like Pricewaterhouse Coopers, McKinsey & Co, Deloitte Touche Tohmatsu or KPMG, all reputed names in the consultancy sector, were neither invited to bid nor consulted on what their charges would be. Insiders allege that there was not even a basic discussion held with them. “Hence, the possibility that the other firms might have quoted a lower price is also ruled out,” says one source.

The contract was given by CIL without tenders, in contravention of CVC directives

SOURCES HAVE alleged that CRISIL paid kickbacks to CIL officials. In fact, in February this year, CBI headquarters in Delhi gave approval for a preliminary inquiry to its special cell in Kolkata. By April, that was revoked: the initial note granting permission to initiate an inquiry was pasted over with a fresh note, advising handing over of the case to the vigilance department of the ministry of coal — hardly a non-partisan authority in such a case.

Reputed consulting firms were neither invited to bid, nor asked for their charges

Sources allege that the matter was hushed up after pressures from Delhi. While Bhattacharyya refused to comment on the matter, Kuljeet Singh Kropha, joint secretary, ministry of coal, as well as the ministry’s chief vigilance officer — the man currently investigating the case — says, “We are taking a fresh look at the case. The investigations will take time.”

That could be true. The larger point, however, is the fact that the frequency with which PSU CEOs think that procedure violation is standard operating practice at their level might well have the sharpest growth on the charts.

From Tehelka Magazine, Vol 6, Issue 28, Dated July 18, 2009

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