CHAPTER 20
MINISTRY OF ROAD TRANSPORT AND HIGHWAYS

National Highways Authority of India

20.1.1    Loss of revenue due to delay in collection of toll

As per the policy of the Government of India the users of all the recently improved national highways shall have to pay toll for its usage. The toll is to be collected at the rates and periods determined by the Government of India, which are to be notified in the official gazette. To implement the above policy the National Highways Authority of India (Authority) shall have to put in place the required infrastructure facilities for the toll collection.

Four-laning work and strengthening of the 126 km. National Highway section of National Highway No.8 between Gurgaon (Haryana) and Kotputli (Rajasthan) was substantially completed during September 2000 and March 2001 in two phases at a cost of Rs.385.50 crore. But as there was a delay in awarding of work relating to setting up of permanent toll plaza, the Authority decided (August 2001) to make arrangements for temporary toll plaza to collect toll from 1 October 2001. As temporary toll plaza was also not ready by 31 December 2001 toll could not be collected by the Authority despite issue of necessary gazette notification by the Government of India permitting the Authority to collect toll in the above stretch with effect from 1 January 2002. Ultimately the Authority started collection of toll from 15 March 2002 when temporary toll plaza was set up.

The delay on the part of Management in the construction tolling booths resulted in the non levy of toll from the road users for a period of 73 days resulting in a loss of revenue of Rs.8.76 crore (calculated at the rate of Rs.12 lakh per day being the average toll collection from 15 March 2002 to 31 March 2002).

Management stated (June 2002) that there was no delay inasmuch as after notification of the rates by the Government of India, temporary toll plaza was constructed and the collection of toll commenced from 15 March 2002 onwards. Contention of Management is not tenable as Government of India specified 1 January 2002 as the date to levy and collect toll whereas the Authority started collection from 15 March 2002. The failure of the Authority for timely action for the awarding of work relating to permanent toll plaza immediately after substantial completion of four-laning work or expeditiously construct temporary toll plaza, caused the delay in levy and collection of toll to the extent of Rs.8.76 crore.

The matter was referred to Ministry in July 2002; their reply was awaited (September 2002).

20.1.2    Loss due to non-recovery of extra cost on reawarding of work

The Authority awarded (July 1996) an item rate contract for four laning work and strengthening of the 126 km National Highway between Gurgaon (Haryana) and Kotputli (Rajasthan) to a contractor, a joint venture of M/s. Birla GTM Entrerpose Limited (BGE) and M/s. Enterprise Jean Lafebvre (EJL), at a cost of Rs.261.81 crore. The work was scheduled to be completed by March 2000. M/s. SMEC Limited, Australia (SMEC) was the supervisor engineer for the construction work.

As the progress of work during the initial stages of its execution was not satisfactory, a high level review meeting was convened at the Authority’s Headquarters on 25 January 1997 between the Authority, SMEC and partners of the contractor to express their serious concern on unsatisfactory performance of the contractor. During this meeting EJL informed that there was no joint venture for the contract with BGE. On noticing the misrepresentation of the joint venture the Authority obtained the advice of the legal advisor as per the recommendation of SMEC and Asian Development Bank (ADB). On the advice of the legal advisor, as per the recommendation of SMEC and ADB, the Authority rescinded the contract of BGE-EJL (joint venture) on 9 June 1997. As per decision of the Board of Directors of the Authority (4 July1997) and approval of ADB the above work was awarded to the next lowest bidder BSC-RBM-PATI (joint venture) at a price of Rs.264.66 crore on 27 August 1997. In order to settle the account of the first contractor SMEC, the engineer recommended to recover Rs.5.17 crore towards interest on unutilised mobilisation advance, the Authority administrative cost, ADB loan cost, escalation costs and consultants costs from the defaulter contractor as per clause 2.6 of general conditions of the contract.

Thereafter, balance work valuing Rs.259.71 crore was awarded (July 1997) to the next lowest bidder at a cost of Rs.264.66 crore with the scheduled date of completion as March 2001. The Authority did not recover the increase in the direct cost of Rs.4.95 (Rs.264.66 crore minus (Rs.261.81 crore plus Rs.2.10 crore being the amount paid to the first contractor for work done) crore which resulted on awarding the work to the next contractor.

Thus, failure of the Authority to recover extra cost from a contractor on reawarding of work resulted in a loss of Rs.4.95 crore.

Management stated (April 2000) that their engineer, SMEC did not consider recovery of the price difference as a justified claim and at the time of rescinding the contract, no mention of reaward of the work at the risk and cost of the previous contractor and recovery of additional cost from them was made to avoid litigation.

Contention of Management is not tenable as recommendation of SMEC was defective since the legal advisor had clearly stated that the Authority was within its rights to claim damages including any direct increase in the cost of work. Depending upon the recommendation of a private party appointed as an engineer and foregoing of a justified claim on the apprehension of a legal case was not a prudent Management decision. It is also not understood as to how this firm was selected as a contractor without verifying the terms and conditions of joint venture ab initio.

Ministry, while endorsing the views of Management, stated (September 2002) that the matter was being referred to Ministry of Law for their opinion.

20.1.3    Irregular payment of royalty

The Authority awarded (July 1997) a contract for four-laning work and strengthening of the 126 km National Highway between Gurgaon (Haryana) and Kotputli (Rajasthan) to a contractor, at a cost of Rs.264.66 crore which was completed in March 2001 at a cost of Rs.385.50 crore.

As per the agreement any new taxes and duties levied by Central/State Government/Local Authority, which would directly affect the cost of the materials other than those already considered in price adjustment should only be paid to the contractor. However, such additional cost shall not be separately paid if the same has already been taken into account in the indexing of any input to the Price Adjustments Formula.

Despite this clear stipulation the Authority paid Rs.4.47 crore as royalty to the contractor under clause 70.8 of the agreement after making payment of Rs.4.52 crore towards increase in the cost of general materials under clause 70.3 of the agreement. This resulted in an excess payment of royalty amounting to Rs.4.47 crore to the Contractor.

Management stated (June 2002) that there was no excess payment as the payment had been released under clause 70.8 of the agreement.

Contention of Management is not tenable as Clause 70.8 clearly specified that additional royalty should not be paid if it was covered under Price Adjustment Formula.

Thus, the fact remains that Authority made excess payment of Rs.4.47 crore to a contractor, which it was not entitled to.

The matter was referred to Ministry in July 2002; their reply was awaited (September 2002).

20.1.4    Avoidable payment of penal interest

Non remittance of tax deducted under the Income Tax Act within the due date resulted in avoidable payment of penal interest amounting to Rs.51.63 lakh.

The Authority had been engaging the services of various overseas consultants from different countries for the development and maintenance of the National Highways and associated facilities. These foreign consultants were paid remuneration in foreign as well as in Indian currency according to the terms of the contracts entered into with them. As per the provisions of Sections 195 and 195 A of the Income Tax Act, 1961, the Authority was responsible for deducting income tax at the time of making payment towards remuneration to the foreign consultants. As per Rule 30 (2) of the Income Tax Rules, the tax deducted had to be paid to the Government within one week from the last day of the month in which the deduction was made and any violation in this regard would attract levy of penal interest as per section 201(1)(1 A) of the Income Tax Act.

Scrutiny by Audit revealed that the Authority had neither remitted the tax deducted from the remuneration paid to foreign consultants amounting to Rs.3.76 crore for the period from 1997-98 to 1999-2000 nor filed the quarterly return with the Income Tax authorities. As a result, the Authority had to pay (May/June 2000) avoidable penal interest of Rs.51.63 lakh to the Income Tax authorities while remitting the tax deducted by them.

Management stated (February 2002) that the delay was mainly due to absence of correct interpretation of the tax provision, which was beyond the control of the Authority. The reply is not tenable as ignorance of the provision of the Income Tax Act cannot be an excuse for non-payment of tax.

Ministry stated (August 2002) that the Authority had been directed to fix responsibility for non remmitance of the tax deducted from the remuneration paid to foreign consultants which resulted in payment of penal interest.

20.1.5    Irregular reimbursement of medical claims

Liberalisation of medical reimbursement rules for the employees of the Authority in violation of Central Civil Services (Medical Attendance) Rules, 1954 resulted in an irregular payment of Rs.45.66 lakh.

The Authority in accordance with Section 35 (1) and 2 (b) of the National Highways Authority of India Act, 1988, notified their Medical Attendance and Treatment Regulations (Regulations), w.e.f. 11 September 1997. As per clause 3 of the said regulations, an officer or employee would be entitled to reimbursement of expenditure incurred on medical treatment of self and members of family provided by a registered medical practitioner and/or approved hospital, subject to a maximum of one month’s basic pay per year. The Regulations did not specify the procedure for preferring/processing the medical claims. Clause 10 of the said Regulations stipulated that matters in respect of which no specific provisions had been made in the Regulations, would be regulated under the provisions of the Central Civil Services (Medical Attendance) Rules, 1954 (Rules) as amended from time to time, and the instructions issued thereunder by the Central Government.

A review by Audit revealed that the Authority processed requests for medical reimbursement claims along with necessary cash receipts in support of the claims till January 2001. Thereafter, Management without the approval of the Board or the Government, decided (January 2001) to reimburse medical expenditure within the ceiling limit on the basis of self-certification by the employee thereby dispensing with the production of supporting documents as required under the Rules. The said internal order was made effective retrospectively from April 2000, as a result of which, the Authority paid Rs.45.66 lakh including arrears (from 1 April 2000 to 14 February 2001) of Rs.1.68 lakh to the employees working in the Corporate headquarters of the Authority and 24 Project Implementation Units from April 2000 to March 2002.

Management stated (April 2002) that the decision to reimburse the expenditure towards out-patients/outdoor treatment up to the limit of one month’s basic pay against actual expenditure incurred and certified by the officer or the employee was taken to facilitate timely and quick disposal of the reimbursement claims.

Contention of Management is not tenable, as the Rules framed by the Central Government stipulating that the claims shall have to be preferred along with the necessary supporting documents, cannot be violated on the plea of simplification and quick disposal of the claims.

The matter was referred to Ministry in June 2002; their reply was awaited (September 2002).