Irrigation Department Fails to Recover 5.95 Crore Advance in Khammam Project
The irrigation department in Hyderabad has been unable to recover a significant mobilisation advance of 5.95 crore rupees paid to M/s Gammon India for the Modikuntavagu irrigation project in Khammam. This failure comes after the contractor did not complete the assigned work, as highlighted in a recent Comptroller and Auditor General (CAG) report.
Contract Details and Initial Issues
The contract was awarded on an engineering, procurement, and construction (EPC) turnkey basis, with an approved value of 124 crore rupees. However, the government proceeded with the award despite incomplete land acquisition. As of July 2005, clearance was still pending for 1,232 acres of forest land, which hindered project initiation.
According to the audit report, acquisition of patta land for the main canal had been completed in certain sections. The agency was instructed to commence work on these reaches, but despite several reminders and notices, the contractor failed to begin any construction activities.
Recovery Challenges and Departmental Lapses
The department faced multiple obstacles in recovering the mobilisation advance. Firstly, recovery from running bills was not possible because the contractor did not execute the work, and the bill values never reached 10% of the contract value, which is required to initiate such recovery.
More critically, the department misplaced the bank guarantees (BGs) submitted by the contractor. This prevented the encashment of these guarantees to recover the advance. The CAG report noted that despite the non-commencement of work, no efforts were made by the department to close the contract and recover the advance along with accrued interest.
It was only in April 2019, more than 11 years after the stipulated completion date, that the State Level Standing Committee recommended foreclosure of the contract. This delay exacerbated the financial loss.
Partial Recovery and Unrecovered Amounts
The irrigation department managed to recover 5 crore rupees of the mobilisation advance by encashing some of the bank guarantees. However, the remaining 95 lakh rupees could not be recovered due to the misplaced guarantees. The concerned bank did not respond to requests for encashment in the absence of the original documents.
Additionally, the audit report revealed that irrigation officials failed to recover interest amounting to 6.89 crore rupees accrued on the advance between March 2006 and March 2023. The CAG observed that this non-recovery resulted in undue favour to the agency, highlighting significant lapses in financial management and oversight.
Broader Implications and Audit Observations
The CAG report underscores systemic issues within the irrigation department, including poor contract management and inadequate follow-up on recovery processes. The failure to secure land clearance and the misplacement of critical financial documents like bank guarantees point to deeper administrative inefficiencies.
This case serves as a cautionary tale for other government projects, emphasizing the need for stricter oversight and timely action to prevent similar financial losses in the future.
