CAG Report in Lok Sabha: Maharashtra’s NHAI Projects Lead to ₹203 Crore Loss, Alleges Favors to Contractors

New Delhi, December 19, 2024 

A recent Comptroller and Auditor General (CAG) report presented in the Lok Sabha during the ongoing Winter Session of Parliament has flagged significant financial mismanagement in the operations of the National Highways Authority of India (NHAI). The report accuses NHAI of incurring losses amounting to ₹203 crore due to delays and irregularities in road projects in Maharashtra, particularly in Nanded and Thane districts, allegedly benefiting contractors.

According to the report, NHAI violated guidelines set by the Central Vigilance Commission. A national publication earlier reported that the Ministry of Road Transport and Highways had received this audit report from CAG on November 4.

Delays and Irregularities in Projects

The CAG report highlights delays in road construction projects awarded under the Build, Operate, and Transfer (BOT) model. These included works on National Highway 361 (Ausa-Chakur, Chakur-Loha, Loha-Waranga stretches) and National Highway 848 (Vadape-Thane stretch), with an estimated cost of ₹4,104.7 crore. Contracts for these projects were awarded in March 2018 to four companies, which formed subsidiaries and signed agreements with NHAI in July 2018.

However, by the stipulated completion timeline for the first phase, where 20% of the work was expected to be completed, no progress had been made. NHAI’s project directors recommended contract termination in July 2020. Meanwhile, contractors sought changes in ownership under specific clauses of the agreement. NHAI approved these changes, issuing provisional approvals in September 2020 and January 2021.

Violation of Norms and Financial Loss

The CAG report accuses NHAI of bending rules during these ownership changes. Previous guidelines mandated a penalty equivalent to 1% of the total project cost for such modifications, to be deposited before final approval. However, NHAI altered these terms, allowing penalties to be deducted from future disbursements to contractors.

The audit points out that the penalty amount collected, ₹49.24 crore, was significantly lower than the ₹252.31 crore calculated based on original contract terms. This shortfall resulted in a ₹203.07 crore loss to NHAI. The report notes that these changes not only reduced financial accountability for contractors but also set a concerning precedent for future projects.

Dispute Over Penalty Limit

A disagreement between the Ministry of Road Transport and Highways and CAG regarding the 1% penalty cap has also come to light. While the Ministry insists that the cap aligns with a 2014 circular, the CAG claims this guideline was not incorporated into post-2014 contracts despite opportunities to do so.

Performance Guarantees Overlooked

The CAG further criticizes NHAI for shifting penalty liabilities from previous contractors to new ones. Despite holding performance bank guarantees worth ₹205.25 crore from earlier contractors, NHAI did not recover damages from these funds. Instead, the liabilities were transferred, indirectly favoring contractors.

The report underscores a lack of adherence to financial accountability and questions NHAI’s decision-making, suggesting undue benefits were extended to contractors at the expense of public funds.

This revelation has sparked widespread criticism, raising questions about governance and transparency in infrastructure projects.