Why Isaac's move to employ SNC-Lavalin to defend KIIFB could irritate his party

Not just opposition leader Ramesh Chennithala, even CPM insiders are a bit confused why finance minister T M Thomas Isaac used the SNC-Lavalin deal to defend his decision to reveal the contents of Comptroller and Auditor General's draft report on the functioning of Kerala Infrastructure Investment Fund Board (KIIFB).

On the face of it, it looked like Thomas Isaac was trying to counter the opposition leader who had on November 14 said a breach of privilege motion would be moved against him for disclosing the draft report contents. "Since when did a CAG draft report become so sacred for the opposition leader and the UDF," Isaac asked during a press conference in Kochi on Sunday.

"Hope you remember Lavalin. Didn't the lie that the exchequer had suffered a loss of Rs 375 crore originate from a draft CAG report? Did the final report have any such observation," Isaac asked.

This provokes a quick counter question. If the draft report was not the final word, as Isaac himself has pointed out, why was he unwilling to wait till the final CAG report on KIIFB's functioning was tabled before he blurted out?

To this, Isaac said that it were the observations in the CAG draft report on SNC-Lavalin that the opposition had used for many years to beat the CPM with. In other word, this time he will not allow the opposition to go to town with certain observations about KIIFB in the CAG draft report that he believed was part of a political conspiracy. Thus the pre-emptive strike.

Some CPM leaders Onmanorama talked to said Isaac's logic was sound but the mention of the old Lavalin case to buttress his argument could end up putting the CPM on the defensive. They said that Isaac had perhaps unknowingly did what the opposition leader had accused him of.

Unwanted publicity

"He wants to bring back the Lavalin issue to the public sphere. That is why he mentioned about the case at the press conference," Chennithala said. He also said that the CAG's draft mention of SNC-Lavalin was leaked not by any minister but by V S Achuthanandan and the people close to him.

The CPM insiders are less worried about the raking up old inner-party rivalries than the possibility that Isaac's Lavalin reference could generate new interest in the final CAG report on the SNC-Lavalin deal. They feel that any discussion about SNC-Lavalin with the CAG attached to it could arouse, as one of them put it, "unnecessary public suspicion at a time when unfounded rumours are being bandied about as the holy truth".

This is not the first time that Isaac had caused embarrassment to the party. At the height of the scandal surrounding the Life Mission's Wadakkancherry project, he had gone on television and said he had knowledge of bribe payments. What he did with such explosive information, the minister is yet to give a satisfactory reply.

Pinarayi' role in SNC-Lavalin deal

It is true, as Isaac said, that one of the findings in the CAG draft ("entire expenditure of Rs 374.50 crore was rendered wasteful") was subjected to a qualitative change in the final report ("the expenditure of Rs.374.50 crore for renovation did not yield commensurate gains").

But this does not mean the final CAG report, tabled in the Assembly on March 31, 2005, had not found anything grave in the SNC-Lavalin deal. Quite to the contrary. And it was especially critical of the role of Pinarayi Vijayan, who was then the power minister. The worry of the insiders stems from this fact.

What the CAG report found most curious was that the “ministerial delegation” that conducted the deliberations with SNC did not even consider the fact that SNC was only a consultant intermediary and not the original equipment manufacturer. (The supply of goods was later made under the contracts by Alstom, Canada, at a considerably higher cost).

When consultants were thus converted into suppliers and supervisors, the CAG said it was only logical that the consultancy part was inherent in the news terms. But the delegation headed by Pinarayi Vijayan allowed SNC to retain the earlier consultancy charges.

Therefore, while the cost of supply of equipment and the related services was fixed at Rs 149.15 crore, the consultancy charges of Rs 17.89 crore that had by then become superfluous were added to the ‘supply and service’ cost, pushing the total cost to Rs 169 crore.

Was the Lavalin deal signed in haste

Here are four major reasons why the CAG felt the KSEB-SNC Lavalin contract was signed in haste: One, the renovation of the Pallivasal Power Station was taken up disregarding the opinion of the Central Electricity Authority not to replace the generators; two, Sengulam and Panniar power stations required enhancement in capacity but KSEB considered their renovation; three, no action was taken by the Board to ensure the reasonableness of the prices quoted by SNC; and four, the full Board was unaware of the necessity for renovation, and the signing of both the agreements.