SAIL lost over 25,000 crore in expansion plans under UPA

Dr R Balashankar
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The mega SAIL loot?

UPA greed for public wealth loot is fast turning the prestigious public sector Maharatna Steel Authority of India (SAIL) into a sick company. Its share value has crashed from a high of Rs 245 in 2010 to an abysmal low of Rs 60 of late, under the UPA. The mega PSU has been milched to such an extent, the CAG is seized of the matter and the loss to the exchequer during this period is estimated at Rs 25,000 crore. Its ambitious expansion plans are pushed to the backburner. Cost escalation because of corruption and  deliberate delay, tinkering with tendering process in violation of  CVC guidelines and cartelisation with political patronage have made most of its plans unviable.

The Maharatna Company, is India’s largest steel maker. Since UPA came to power it has been slowing down on its expansion plans. The NDA had big plans for raising its production capacities initially up to 26 million tons through SAIL subsidiary units at ISP (IISCO Steel Plant), BSP (Bhilai Steel Plant), BSL (Bokaro Steel Plant), RSP (Rourkela Steel Plant) and DSP (Durgapur Steel Plant), and SSP (Salem Steel Plant).
Futuristically the capacity was to go up to 60 million tons (MT) by 2020, when the country’s total steel output will reach 180 MT.

While SAIL has presently just 19-20 per cent share of the total steel production in the country it was planned to increase it by 2020, to have  one-third of India’s total steel output. The capital cost of the ongoing in-house expansion and modernisation projects of SAIL, which was originally estimated at Rs 35,000 crore during 2004-2008, over shot according to official admission to Rs 54,000 crore in  2010-2012 and and now envisaged to be in the range of Rs 72,000 crore. The principal reason attributed towards this whopping increase in budgeted capital investment costs, as confirmed by a senior official of the Steel Ministry, was undue delay in execution of the project plans, corruption that has wantonly seeped into its core, political interference invoking discretionary powers to sabotage genuine bids and favour  a select few to amass and disburse large booty.

Officially, however, the steep hike in prices of steel, increased costs for equipment and construction materials, equipment suppliers being over booked thus demanding higher prices,  “weakening of Rupee”, “galloping inflation – currently at 12.40 per cent”, are all pushing up cost.
Sources associated with the SAIL expansion programme, and documents in the possession of Organiser however show that, a cartel of contracting companies with full complicity of top bosses of the Steel Ministry and certain  power brokers, were manipulating tendering norms, circumventing the guidelines of the Central Vigilance Commission (CVC), inflating the project capital investment costs, towards generating massive kick-backs, loser’s fees, commission, including inflated profit margins, thus incurring huge loss to the exchequer.

As a result of the massive corruption in SAIL, the capital base eroded drastically, investment costs shot up. The expansion programmes, had to be put on a slow mode  with due expansion of Bokaro Unit and Durgapur Unit,  getting deferred and expansion of their Bhilai Unit being slowed down, all because of over-spending and consequential shortage of budgeted funds.

It was a matter of serious concern that the highhanded corruption in SAIL Project would consequently make the company, economically unviable, if not sick and once again a loss making enterprise.

The formation of a corrupt syndicate
As soon as the United Progressive Alliance Government was set up in 2004, Ram Vilas Paswan was made the Union Minister in Ministry of Chemicals and Fertilizers and Ministry of Steel. Very close to him amongst his coterie of middlemen, was sources say, Sanjay Kumar Pasari, a Kolkata based businessman, who overnight became the principal operator for all the revenue based business activities in Central Public Sector Undertakings (PSU), in  Steel, Fertilizer and Coal. Pasari’s name was synonymous with PSUs. Pasari took over the role of a middleman and commission agent, generating kickbacks, to the tune of thousands of crore, for which the beneficiaries were, he himself, certain political quarters, senior officials of the respective Ministry, PSUs, as well as the vendors and contractors. To facilitate generation of slush funds out of the public  wealth a massive syndicate was in operation, which still flourishes under the new minister Beni Prasad Verma of the Congress. Officials of specific choice and favour were picked up and appointed into key positions, in these central PSUs, right from the chief executive levels up to the manager levels, ensuring their whole hearted involvement, cooperation and collusion.

Within four to five years, the syndicate became infamous and notorious in its activities that no commercial decision in any of the said Government Undertakings, could happen without factoring a high percentage value of the contracted-deals, as kickback for itself. This was known for long to NGOs, Social Reformist Groups, Labour Unions and political parties but in the procession of high profile scandals tumbling out of the UPA cupboard on a daily basis, the steel scams took a back seat. In fact, but for stray reports here and there, it largely escaped public scrutiny, till the CAG moved in, and some Mumbai based NGOs, exposed the massive loot in their memorandum to the SAIL board members and the steel minister. It is even alleged that the present minister from UP is siphoning off funds for Rahul Gandhi’s high decibel poll campaign in the state.
The complaints earlier resulted in the Central Bureau of Investigation (CBI) suo moto to taking cognizance and was reportedly hot on the trail of the syndicate and Sanjay Kumar Pasari himself. Though the CBI was able  to confirm and identify the involvement of a syndicate, in heavy money making rackets, money laundering and corruption activity in the PSU  under the Steel, Coal, Mining & Fertilizer Ministry, unfortunately due to the complicity and involvement of very influential quarters, no substantial action could be taken against anybody.

Therefore, sources say, the focus of the CBI had narrowed down to an individual alone, ‘Sanjay Kumar Pasari’, but here again, no charges could be framed, due to his influence in the highest quarters. However, in the most  innocuous, harmless manner possible, in accordance with the guidelines on the “Program for Vigilance and Anti-Corruption work, as notified by the CBI form time to time, Sanjay Kumar Pasari was included in the list of UCM (Undesirable Contact Men).

In the meantime Pasari, was caught by US Authorities on behalf of the Justice Department & Exchange Commission, probing alleged charges of corruption and bribery of officials of the Government of India, disbursing kickbacks to the tune of over 400 million US$ (more than 2000 crore of Rupees).

Further, the middleman Pasari, operating mainly in the steel, coal and mining sector, was implicated by the US Justice Department and Securities & Exchange Commission in late 2010 on proven charges of corruption and bribery of Public Servants.
A Geneva court order passed on February 16, 2011 upon the alert issued by US authorities under International Criminal Mutual Aid, froze (probative sequestration) account of Sanjay Pasari (No. 2952334), his brother Rajiv Pasari (a/c no: 1996090), their firm Savan Foundation (a/c no: 1159024  and his company Infotech Guernsey (a/c no. 189502) at Lloyds TSB Bank in Switzerland.
Modus operandi

During the period major expansion projects of cash rich PSUs, like SAIL, RINL, NMDC and KIOCL were on the anvil for tendering.To establish a concerted single point control, where from the decision making and manipulations could be conducted at ease and secretively, also to deflect the responsibility of decisions, it was agreed to engage independent Consultants, responsible for the tendering process, evaluation, recommendations and the implementation of the projects, of the central PSUs. MECON Limited, a Central PSU –and the flagship consultancy organization under the Steel Ministry, based at Ranchi, was identified as the ideal extended arm of the syndicate, to take up the above project of SAIL. Projects to the tune of over Rs 80,000 crore duly safe guarding the vested interest of the latter.

The Director Board of MECON was reconstituted to include, key men. Then chairman Drona Rath was later on, after his retirement placed as a Director in both NMDC and L&T, by Sanjay Pasari, where all the syndicate had major business interests. Sources say that as a rule, the price bids were to be opened if only those vendors, who formed a part of the cartrel, with their pre-agreed understanding. Contract was always ensured to be given to the preferred bidder. The rest of the bidders were given indirect benefits. Through a clever system of manipulation, they ensured that, only a single bidder entered the fray for a package, by duly eliminating competition completely. Where ever the pre-designated bidder cannot become lowest bidder, retender the package.

With this wholehearted collusion between the respective clients (SAIL, RINL, NMDC, KIOCL, etc.), consultant and cartelized contractors, the syndicate systematically moved forward with their new business plan, amassing substantial wealth at the cost of financial losses to the Central Exchequer and the PSUs. Here, the focus though, is on the steel sector.
SVAI, SMS, Danieli, BEC, McNally Bharat, etc. Sources revealed that Pasari, also enjoyed influence in the management of these companies, either directly or indirectly.

Thus tender evaluation processes are being stage-managed with a pre-meditated understanding, where-in it is already pre-decided on whom all the contracts are to be awarded, even before the tenders are invited or short-listing process have started.
It is most surprising to note that in majority of cases of high valued tender finalization in SAIL, final evaluation and recommendations for contract awards have ended up on a “single tender” basis, with only one company (read as the preferred vendor) being qualified for price bid opening and subsequent order placement. Project contracts worth thousands of crores of Rupees have been finalized in SAIL on a “single tender” basis, at a price much higher than the budgetary estimates based on the exclusive recommendations from their Engineering Consultant – MECON. While CVC guidelines mandate transparent procedures to be adopted through invitation of global open tenders, encouraging healthy competition and attracting adequate and wider participation. However, sources say that the  practice adopted by SAIL – MECON has been to discourage and eliminate competition by way of limited participation, simply by manipulating the “tendering invitation process”.To eleminate corruption in tendering process and award of contracts it is necessary to immediately refer the matter of finalization of entire expansion and modernization projects to Central Vigilance

Authority and also simultaneously to Central Bureau of Investigation. This will expose the nexus between the corrupt officials in SAIL-MECON with contracting companies. The corruption, delay and impact of increased capital costs are certain to erode the profitability of this Maharatna Public Sector Undertaking
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