Exemption under KTPP Act leads to cost escalation, KEA flags practice

An assessment report of works, carried out by the Karnataka Rural Infrastructure Development Limited (KRIDL), by the Karnataka Evaluation Authority has flagged the practice of exempting the state-run agency from the tender process.

The study noted that the government could have saved money by allotting projects via competitive bidding rather than handing over projects using tender exemptions.

The report also highlighted that 25-30 per cent of KRIDL works were carried out in BBMP limits, even though the firm was established to take up works in rural areas to promote socio-economic development.

“There is evidence that awarding projects on nomination basis leads to cost escalations,” the report by Karnataka Evaluation Authority said. One comparative assessment has shown that awarding projects on competitive basis leads to cost savings to the tune of 7 per cent to 9 per cent, it pointed out, citing the example of Kerala which allowed competition amongst PSUs and prescribed the accreditation of PSUs to make them eligible for government projects.

“In order to remain sustainable in the face of competition, KRIDL will need to improve its efficiency, expertise and internal controls,” it said.

KRIDL, it can be recalled, was sanctioned projects under section 4(G) of Karnataka Transparency in Public Procurement (KTPP) Act - which provides for contracts to be awarded without floating tenders - for several years via government orders.

However, the award of projects of KRIDL under 4(g) exemption was challenged in the High Court which stayed the practice in 2021.

Urban-centric

The report said that of the 40,715 works executed during the five-year period from 2015-16 to 2019-20, three departments namely Bruhat Bengaluru Mahanagara Palike (BBMP) (35 per cent), Karnataka Water Supply and Sewerage Board (KWSSB) (26 per cent) and Rural Development and Panchayati Raj (RDPR) (14 per cent) commissioned around 75 per cent of all works undertaken by KRIDL.

The practice of taking up works in urban areas went against the agency’s objective of undertaking “development works in rural areas which promote socio-economic development” and creating “employment opportunities for unemployed and under-employed youth in rural areas by focusing on labour-intensive infrastructure works.”

There is also a perception that KRIDL subcontracts a significant portion of works and “there could be a possibility of “middlemen” extracting some of the value which ideally should have been passed through as remunerative employment to the unemployed and under-employed rural youth,” the report added.