The Hindu Business Line : Material modifications — CAG raps Railways for being out-of-line

Sounds silly, but that is exactly what the Railways did in the case of a gauge conversion project in Haryana, attracting the ire of the Comptroller and Auditor General of India (CAG).

In its latest report submitted to Parliament, the CAG has pointed out serious lapses on the part of the Railways in approving new lines and projects in the garb of "material modification".

An audit review of 10 projects by the CAG reveals that the Railways has been flouting guidelines and sanctioning new projects as "material modifications" of existing lines. The CAG estimates that the Rs 3,361 crore to be sunk in these projects was not only financially unviable, but could actually lead to recurring operating losses once completed.

The CAG has pointed out that the Railways approved the gauge conversion of the 70-km Sadulpur-Hissar section as a material modification to the Sadulpur-Rewari gauge conversion six months before the original project itself was approved.

The material modification was ostensibly approved on the request from the Army to fulfil a strategic need by providing a Hissar-Sadulpur-Bikarner-Lalgarh line. While the original Rewari-Sadulpur section does not even fall in the alignment indicated by the Army, the material modification was approved on the pretext of the "strategic need". The so-called strategic need is, however, yet to be fulfilled.

As per the Railways' code for the Engineering Department, a material modification can be carried out without approval from the authority sanctioning the original project only if it involves a change of alignment, departure in construction standards, introduction or deletion of a station, alteration in the inter-locking standards and a sub-work that involves an additional outlay of less than Rs 5 lakh.

In a case of the right hand not knowing what the left is doing, the Railways sanctioned track renewal of Bankura-Rainagar narrow-gauge line along with a gauge conversion of the same section. Although the track renewal work was later taken off the annual works programme, their simultaneous inclusion shows lack of clear direction while taking up major investment decisions, the CAG report says.

The construction code requires that to be financially viable, an investment has to yield a minimum 14 per cent rate of return. For socially relevant and strategic projects, the norms can be relaxed. In the case of the 10 projects reviewed by the CAG, the projected rate of return was below the norm. After adding the material modification to an uneconomic line, no calculations were made to arrive at the new rate of return.

"As none of the material modifications were expected to yield the minimum prescribed rate of return, the revised estimates, after including the cost of these material modifications, would have resulted in further deterioration of the already poor rate of return of the originally sanctioned projects," the report says.

In two material modifications — the 110-km Deogarh-Sultanganj and the 87-km Ekhalaki-Balurgat new lines — the Railway Board did not even commission a survey to assess the rate of return. The cost estimates for the two projects were also made without any details, the CAG report says. Another project that defies all norms, the 44.5-km Fatuah-Islampur line restoration in Bihar, had four new lines added as material modifications.

The total length of the new lines works out to 116 km, more than double the original line itself. The cost of the original line was pegged at Rs 49.50 crore and "modifications" to it would have cost another Rs 419.65 crore, the report says.

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