By Jayajit Dash
The performance guarantee provided by minor port developers to the Odisha government was less than that prescribed by the model concession agreement, says a recent report by the Comptroller & Auditor General (CAG). Clause 4.1 of the model concession agreement stipulates during the construction phase, performance guarantee equivalent to five per cent of the estimated project cost be given by the concessionaire to the concession authority. However, during its performance audit of public-private partnership port projects, CAG found the concession agreement of the Astaranga port provided a performance guarantee of one per cent, against the required five per cent.
The concession agreements of Astaranga, Dhamra and Subarnarekha also provided performance guarantees of one per cent of the estimated project cost during the construction phase. In the case of Gopalpur port, the state commerce and transport department had realised a performance guarantee of Rs 20 crore, 1.65 per cent of the estimated project cost of Rs 1,213 crore.
As of September 2012, against Rs 133.09 crore due as performance guarantees (according to the concession agreements of four ports), only Rs 44.64 crore was given by two ports (Dhamra and Gopalpur). According to the model concession agreement, Rs 626.08 crore was payable, while according to the concession agreement signed with the minor port developers, the amount payable was only Rs 133.09 crore.
The secretary (commerce & transport) said whether the performance guarantee should be one per cent or five per cent depended on the size of the project, as well as other circumstances. He added in case of a greenfield port, in which investment and risks were much higher, the performance guarantee was agreed to in the concession agreement.
CAG, however, didn’t accept this. It felt adequate performance guarantee was required for providing safeguards against inefficient and improper performance, including during the construction phase. Besides, the gross performance guarantee amount could be different, depending on the size of the project and investments made; but the percentage value should be uniform, according to the model concession agreement, it said.
CAG has also rapped the state government for the failure of private port developers to open escrow accounts in banks, despite there being a provision for this in the model concession agreement. In the absence of an escrow account, for the four ports, the commerce & transport department wasn’t aware of the quantum of equity and debt inflow into the project, the expenditure made and the booking of the expenditure by the concessionaire.