Policy

CAG raps MERC for irregular expenditure

| Updated on: Apr 24, 2011

The Comptroller and Auditor General has rapped the Maharashtra Electricity Regulatory Commission for the lack of transparency in awarding consultancy work.

The CAG has red flagged Rs 9.66 crore consultancy fee, terming it an ‘irregular expenditure'.

It is probably the first time that the CAG has made such an observation about the accounts of MERC, who is the regulator for the power sector in the State, having quasi-judicial powers.

According to the latest commercial report prepared by CAG's Maharashtra office, MERC decided to seek services of a consultancy firm in July 2005, on a retainer basis. However, the Commission did not give adequate publicity for calling the competitive bids in a transparent manner. Nor did it circulate a Request for Proposal to prospective bidders in an objective manner.

The MERC had discussed the requirements with Deloitte Touche Tohmatsu (DTT) and ICRA Management Consulting Services Limited (IMaCS) but later rejected their offers.

After rejection of these offers, two members from each of the firms quit their jobs and formed a partnership firm ABPSIA Private Limited.

The amount quoted by ABPSIA for three years worked out to Rs 2.79 crore based on average per person man day rate. The offer of ABPSIA was more expensive by Rs 35.95 lakh compared to the offer of DTT, the report said.

“The Commission neither compared the rates of ABPSIA with the rates quoted by DTT nor negotiated the rates and asked the ABPSIA to match the rates with that of DTT. The rates of ABPSIA were justified as reasonable and the work was thus awarded without regard to the financial interest of the Commission,” the report said.

The report pointed that the consultancy work was outsourced to ABPSIA for a period of five years at the rates quoted by it without ascertaining the reasonability of rates.

What is more startling is that in 2005 the validity of the ABPSIA offer was upto 15 September, however, the Commission accepted the offer on 19 September, after the expiry date. And though the offer was accepted on September 19, 2005 - ABPSIA started work for MERC from September 9, the report said.

“The starting of work by the firm before acceptance of offer indicates that the Commission was pre-determined to award the work to ABPSIA,” the report added.

rahulw@thehindu.co.in

Published on April 24, 2011

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