Rs 321-crore horse fair contract: Senior bureaucrat had red-flagged major violations before contract was awarded

On November 28, the day the new Shiv Sena-NCP-Congress government led by Uddhav Thackeray was sworn in, the state’s tourism department, following orders from Chief Secretary Ajoy Mehta, had ordered the “immediate cancellation” of the Rs 321-crore contract that the state-run Maharashtra Tourism Development Corporation Ltd (MTDC) had entered with Ahmedabad’s Lallooji and Sons, on December 26, 2017, to “conceptualise, design, execute, manage and operationalise” the Sarangkheda Chetak festival in Nandurbar on a turnkey basis for 10 years. The order cited “serious financial irregularity” and “flouting of norms” as reasons behind the cancellation.

According to records, in November, 2017, then Principal Secretary (Tourism) Vijay Kumar Gautam had in an official communication said that norms had been flagrantly flouted during the tendering process for the contract.

Incidentally Gautam, a 1987-batch IAS officer, currently posted as a member secretary with the state’s Human Rights Commission, was transferred from the tourism secretary’s post the same month.

Documents show that Gautam had raised a strong objection to three major changes that were introduced in the pre-qualification criteria for bidders after the bid’s original submission day. He had also pointed out that the government’s mandatory approval before floating the Expression of Interest (EOI) was not sought at all.

On November 3, 2017, the MTDC had published the EOI for the contract, announcing that the last day of submission of bids as November 13, 2017. Gautam’s note had pointed out that the MTDC had approached the government for approval to the draft EOI and an annual viability gap fund (VGF) on November 6, 2017, on which the department had raised a query.

On November 15, two days after the expiry of the last submission day, the state agency issued a corrigendum, where qualification conditions regarding work experience and financial worth were significantly diluted while extending the submission date by just one day.

While the company’s minimum net worth to become eligible to bid was fixed at Rs 75 crore initially, this was brought down to Rs 5 crore. Similarly, the work experience requirement was brought down from 10 years to five years, along with dilution of a condition regarding worth of a past project with the government, which was reduced from Rs 30 crore to Rs 5 crore.

Three bidders eventually participated in the bid that opened on November 17, with the Ahmedabad-based firm winning the contract.

Documents further show that the then section officer of the tourism department, R L Lakhote, in another official communication to the MTDC on December 13, 2017, had referred the discussions with Gautam, stating that the department’s query regarding how the VGF component had been arrived at had still not been communicated.

“Some disturbing facts indicating administrative and financial irregularities have emerged. On the perusal of the documents of record, it is clear that the entire operation was led and front headed by (then) Joint Managing Director, with the Managing Director taking a peripheral position,” Lakhote said in the note.

Despite the department’s objections, the MTDC had signed an agreement with the Gujarat firm on December 26, 2017.

According to the arrangement between the MTDC and the firm, Rs 321 crore was to be spent for organising and marketing the festival from 2017-18 to 2026-27. The corporation further committed Rs 75.45 crore (inclusive of taxes) as viability gap fund to the contractor over these 10 years.

In September 2018, the Principal Accountant General’s office raised an audit objection, alleging that “excess expenditure had been paid to the firm”.

In May this year, the state’s planning department red-flagged the project, questioning the move to release the VGF. “There is no tourism policy to grant such VGF in Maharashtra,” the department stated. Further, it said that “executing an agreement and committing to the payment on the state’s behalf without taking prior approval from the state government or the cabinet was a serious financial irregularity”.

When contacted, MTDC’s then Joint MD Ashutosh Rathod said, “All decisions regarding the festival, including the one to modify qualification conditions, were with the approval of the MD and the minister.”

Then Tourism Minister Jaikumar Rawal, who was also MTDC’s chairman, remained unavailable for comment, but had denied any wrongdoing when the matter was raised in the state assembly in June.

Bhavik Seth, manager (finance and operations) of Lallooji and Sons, meanwhile, said, “As far as we are concerned, we have adhered to all terms and conditions and performed all deliverables in the last two years. We are yet to receive an official communication regarding the contract’s cancellation.”