In a shocking revelation, a Comptroller and Auditor General audit report tabled in the Gujarat assembly on March 30 opened the lid on massive diversion of funds worth Rs 1,833.12 crore meant for the development of the Sardar Sarovar dam's main canal and distribution network "to other areas of the project which led to the delay in creation of irrigation potential.”

Not just this, the CAG’s Performance Audit Report on Accelerated Irrigation Benefit Programme (AIBP) also entered the public domain on May 7. The apex audit institute states that it found “substantial diversion of funds and other financial irregularities in the AIBP components” of the SSP, Gujarat. It added that the state government overstated the expenditure incurred out of AIBP Central Loan Assistance during 2003-2005 by Rs.1,158 crores.

“Even the Utilisation Certificates provided by SSNNL (Sardar Sarovar Narmada Nigam Limited) for utilisation of funds of Rs.675.20 crores provided by GoI under Drought Prone Area [DPA] component of AIBP were irregular, as the branch canals that were shown to be covered under DPA were already constructed or were under-construction when the DPA component was introduced.” SSNNL is the Gujarat government-owned corporation which was assigned the task of building the controversial Narmada dam.

A history repeated

Eight years ago, the CAG carried out a performance audit of finance mobilisation by SSNNL. They found that although SSNNL had received a rather larger share of central loan assistance under the AIBP, the money was not utilised for the stated purpose, i.e. canal construction.

The audit finding had stated, “The funds released under AIBP were specifically meant for the construction of canal and distributaries; however, no such segregation of funds was made from 1998-’99 to 2000-‘01 (although in the initial two years, i.e. 1996-’97 and 1997-’98, the state government did mention that Rs 221 crore were sourced from AIBP) and the entire amount (Rs 1,077 crores) was provided to SSNNL (indicating diversion of AIBP funds for works other than the ‘stated purpose’).”

SSNNL’s shoddy reply

In July 2001, SSNNL had filed a shoddy reply stating that the State Government included the AIBP funds received by it in the budgetary support. However, it did not specify the purpose for which the amount was spent. In the conspicuous absence of this specific information, it cannot be presumed that the AIBP funds were utilised for the sole purpose they were meant for.

Two years later, another CAG report scrutinized the performance of AIBP around the country. The report made an indicting statement not only on SSNNL, but also on Planning Commission and the Ministry of Water Resources (MoWR) which made the Sardar Sarovar Project (SSP) the largest recipient of AIBP funds. According to this report, the Planning Commission could not approve the cost estimates revised subsequently during 1991-92, 1996-97, and 1998-99 “due to disputes between the Governments of Gujarat and Madhya Pradesh over certain issues….” “However, pending such approval, CLA of Rs. 2,896.25 crore, was irregularly released during 1996-2003 after the selection of Unit II components of the project for execution under AIBP.”

The height of irony

Coming back to the present, in contrast to the revelations of CAG's report of this year, The Times of India reported on February 12, 2010, in its Gandhinagar edition that the central government was thinking of extending Rs 11,000 crores more to the controversial project. Recent media reports also suggest that SSNNL and GoG have now sent in the latest cost estimates for the SSP (with the total costs being put at Rs 39,000 crore) to get them cleared and approved by Planning Commission.

It is an irony that even after being caught on the wrong foot once, the corporation has been allowed divert the funds received from the central government under AIBP. Repeated indictments by CAG ought to have dissuaded the central government from extending the largesse to SSNNL. This has not happened.

Isn’t it an irony that even after being caught on the wrong foot once, the corporation has been allowed to divert the funds received from the central government under AIBP?

 •  Construction, at any cost
 •  Horrifying face of the dammed river

The story is this: Budget making, demands for grants/central assistance, and allocations remain an exercise in India’s fiscal governance quite divergence to major audit findings. Pick up an audit report from the shelf randomly and look at the last line of an audit paragraph, most often you will come across this text: “The above matters were reported to department/ministry/Govt. in (month, year). The reply has not been received till date (month, year).”

Mallika Sarabhai recently wrote in her column in DNA: “Gujarat prides itself for its business acumen and entrepreneurial spirit. So what would a Gujarati businessperson or entrepreneur say to a business model (read: financing of Narmada Dam) where close to 53% of all the money spent over the last five years (read: between 2001-‘02 and 2005-‘06) has gone as interest (and debt repayment) to bond holders?”

As I read this, her words did ring a bell but I was wondering whom had I heard articulating this question earlier. It led me to the yellowed pages from an old CAG audit report tabled in 2002. The report said that while submitting the original investment proposal to the Planning Commission, the components of cost towards interest charges and debt servicing were not identified. “As on March 31, 2001, the company had incurred an expenditure of Rs 10978.63 crore, of which, an expenditure of Rs 2413.98 crore (i.e. 22 percent) was towards interest charges and servicing of debt liability.”

Also, her question reminded me of the not-so-yellowed pages of Down To Earth (Deep Flow, May 15, 2006;), which had quoted P K Laheri, the then CMD of SSNNL, as saying; “Rs 21,000 crore has been spent on the project by April 2006. While Rs 13,000 crore has gone on the dam and its distribution network, the remaining is for debt servicing.”

However, if Mallika Sarabhai were to ask the question then, she didn’t need to be a Nobel Prize-winning economist. All she had to do was some simple arithmetic. Here was an honorable CMD going on record about how much SSNNL spent on debt servicing and interest charges as on April 2006 (Rs 8000 crore) and she just needed to place beside it the figure of what SSNNL had spent as on March 31, 2001, on debt servicing and interest charges, i.e. Rs 2413.98 crore. Again, a figure coming from an undisputable source -- CAG of India.

One can almost forgive ‘unasked questions’ staring from the copy of that Down To Earth article. One can also perfectly understand that it took four long years for public intellectuals to ask the same question that could have been posed during May 2006, (and may be right then in November 1993 when SSNNL floated Deep Discount Bond issue that proved to be having a deep design error).

‘Conditional’ clearance

Even at this very moment, as we get to read a 27-page indictment of SSNNL in the CAG audit report tabled on March 30, 2010, Environment Sub Group of Narmada Control Authority has granted a ‘conditional’ permission to raise the height of the dam further by installing 17-metre-high radial gates by undermining a critical report that underlined non-compliance on environment measures on April 1.

The statement by Environment Minister Jairam Ramesh that the clearance is “conditional” as SSNNL has been asked not to impound the reservoir but keep the gates open sounds so ridiculous. It is as if he were to grant a similar clearance to NHAI to build a road through a sanctuary asking them not to allow vehicular movement!

The ministry that should know the import of precautionary principle, appears to be turning the pari passu clause on its head, where in it does not want to regulate but allow construction first on ‘conditions’ with veiled threats that ‘the work would be stopped if the impacts occur’. However, looking at the long saga of Narmada inspires no confidence that violations will not occur.

The unasked, and as yet unanswered, question then seems to be: how long will fiscal and environment governance remain in divergence from the audit findings? And if this ‘culture of impunity’ continues, which Noah will save us all from the ‘culture of catastrophe’?