If a metro project executed under public private partnership (PPP) faces a cost escalation of more than 10% of the sanctioned cost, it may invite a CAG scrutiny in the near future.
The Union urban development (UD) ministry has moved a cabinet note proposing that the Comptroller & Auditor General (CAG) audit all such PPP metro projects from the implementation stage itself.
The move has been necessitated as currently if a project gets terminated — even if it is because of the concessionaire’s fault — the concessioning authority, which in a majority of cases is the government, has to shell out a major chunk of the project cost — both debt due and equity — as termination payment.
“Because the defacto liability of the project cost falls on the government, it is but natural that the government should be vigilant from the start,” said an official.
Presently there is no mechanism to audit cost of PPP projects during implementation stage. The proposal comes close on the heels of Delhi Airport Express metro line case where Reliance Infrastructure, the concessionaire terminated the project. The Delhi Metro Rail Corporation will now have to pay over Rs. 1800 crore to the concessionaire as termination payment.
The ministry’s cabinet note comes following a direction from the Cabinet Committee on Economic Affairs to propose measures considered necessary to improve execution of PPP metro projects.