CAG raps airport operator for using escrow account funds

 A private operator at the Hyderabad airport utilised Rs 100.40 crore from an escrow account for “inadmissible work” like paying insurance premium and has not returned the money for the past one year despite Civil Aviation Ministry’s demand, the Comptroller and Auditor General (CAG) has found.

In its report tabled in Parliament on Friday, the CAG said the utilisation of this amount from the Passenger Service Fee (Security Component) escrow account was “irregular” and needed to be reversed early.

The audit for the fiscals from 2007-08 to 2011-12 found that the operator GMR used this amount from the escrow account for paying premium for terrorism insurance and purchase of land and construction of quarters for CISF besides other works.

The payment for these works could not be sourced from escrow account, according to the ministry’s standard operating procedure (SOP) for regulating this escrow account.

Of the Rs 200 per person collected as Passenger Service Fee at the Hyderabad airport, 65 per cent (Rs 130) goes to the security component and the rest for facilitation component.

The operator can keep the facilitation component while the security component is kept in an escrow account, which is issued to defray security-related expenses.

According to the CAG, the operator incurred Rs 1.46 crore in 2008-09 and Rs 85 lakh in the next fiscal for administrative purposes. Only legal expenses that on a case-to-case basis can be drawn from this escrow account and no administrative expenses should be taken from this.

The payment of a total of Rs 1.60 crore for three fiscals from 2009-10 under the head “Terrorism insurance premium” was also flagged by the CAG saying only fixed assets created using the escrow account could avail insurance cover using this account.

The biggest amount withdrawn from the escrow account was for construction of quarters for CISF (Rs 65.89 crore) in 2008-09. The amount for purchase of land was Rs 4 crore and another Rs 26.57 crore was paid as interest on funds borrowed for construction of quarters. According to the CAG, only payments to CISF from escrow account are admissible while expenditure incurred on the construction cannot be admissible as it is not a payment made to the force.

The CAG had earlier raised the issue with the Civil Aviation Ministry, which, in July 2012, directed the operator to “immediately reverse” the entire ineligible expenditure incurred up to 2010-11 and submit a compliance report.