CAG flags Rs 297 crore unnecessary expenditure in Maharashtra road projects

Mumbai: The Comptroller and Auditor General of India (CAG) has flagged an unwarranted expenditure of Rs 297.97 crore in road projects in Maharashtra executed under the Hybrid Annuity Model (HAM).

The report was tabled in the state legislative assembly on Wednesday. HAM is a public-private partnership model where the government pays a part of the project cost during construction, while the developer funds the remaining portion and is repaid through fixed annuity payments over time.

The performance audit of 'Improvement of Roads in Maharashtra through Hybrid Annuity Model' covered the period from 2018-19 to 2022-23.

The state government decided in November 2017 to develop 10,576 km of roads, out of 90,608 km, under HAM with an estimated investment of Rs 30,000 crore. It comprised 60 per cent government equity of Rs 18,000 crore and 40 per cent private equity of Rs 12,000 crore, the report said.

The report noted that the specification for 'crust thickness' of flexible pavement, which was higher than required as per projected Million Standard Axles (MSA) in Detailed Project Reports (DPRs), led to an unwarranted expenditure of Rs 297.97 crore.

It also flagged deficiencies in DPR preparation, including lumpsum provisioning for utility shifting without component-wise estimates and inclusion of an incorrect clause in the Request for Proposal (RFP) for DPR consultants, resulting in avoidable expenditure.

As many as 78 DPRs covering 195 works were prepared at a cost of Rs 217.40 crore, including an unnecessary provision of Rs 5.55 crore towards land acquisition activities not undertaken, the CAG said.

The authorities failed to make timely milestone and annuity payments in three out of 42 selected HAM packages due to delays in release of funds by the government, leading to interest payments of Rs 4.65 crore to concessionaires.

There were excess payments in certain cases due to incorrect computation of completion cost, short adjustment of payments made during construction, and application of incorrect interest rates, the report said.

The audit also flagged unrealistic loading of insurance charges in Operation and Maintenance (O&M) costs, resulting in excess insurance burden of Rs 34.56 crore in 17 out of 42 selected packages.

Insurance charges were estimated at 0.15 per cent of the Estimated Project Cost instead of actual premiums, with concessionaires paying between Rs 0.50 lakh and Rs 9.07 lakh annually against provisions ranging from Rs 10.34 lakh to Rs 46.13 lakh. A lumpsum provision of Rs 10 lakh per year towards patrolling expenses was also made irrespective of the road length.

The report further pointed out that works in three packages were started without obtaining mandatory forest clearances, leading to de-scoping or non-execution. In three cases, roads were not fully utilised due to non-coverage of narrow minor bridges, reconstruction of weak bridges and incomplete bridge stretches.

The audit flagged serious monitoring lapses, including shortfall in inspections by Vigilance and Quality Control Circles, absence of inspection targets at Chief Engineer, Superintending Engineer and Executive Engineer levels, and delays in appointment of independent engineers in 20 out of 42 packages and safety consultants in 29 packages. No independent engineers were appointed during the O&M phase.

The CAG also noted delays in submission of performance security, execution of escrow agreements and achievement of physical progress milestones, along with instances of poor or non-maintenance observed during joint physical inspections.

The report, however, took note of improved connectivity in certain stretches. Travel time for the Ashta-vinayak pilgrimage covering 606 km has decreased from two-to-three days to 13 hours and 30 minutes after execution of select HAM packages, it said.

The CAG recommended thorough preparation of DPRs, realistic estimation of O&M costs, timely financial allocations to avoid interest liabilities, accurate computation of payments and stronger monitoring mechanisms to ensure compliance with concession agreements.