K-FON budget 'inflated' by Rs 500 crore, work order lands in Presadio's lap

Kasaragod: The first Pinarayi Vijayan-led LDF government inflated the cost of the Kerala Fibre Optic Network (K-FON) project by 50 per cent or around Rs 500 crore, alleged Leader of Opposition V D Satheesan. Onmanorama found that the project cost could be Rs 600 crore more than the initial estimate of Rs 1,028 crore.

Satheesan said one of the end beneficiaries of the "inflated cost" was Presadio Technologies Private Limited, a Kozhikode-based company that BJP leader Sobha Surendran alleged was linked to chief minister Pinarayi Vijayan's family.

The government is implementing the project by partially borrowing from KIIFB, a government company that raises money for infrastructure projects from the market.

Speaking to reporters in Kasaragod on Thursday, Congress leader Satheesan alleged that the modus operandi to scam the public was the same in the K-FON project and artificial intelligence (AI) traffic camera project.

On Wednesday, Congress leader Ramesh Chennithala pegged the alleged scam in the AI traffic camera project at Rs 132 crore (https://bit.ly/3Vn40vE).

"In both the scams, the players are almost the same. They form a cartel to corner the projects and then sub-contract the work to Presadio," said Satheesan.

In the AI camera project, the Kerala government's company Keltron anchored the shady contract, and in the K-FON project, central PSU Bharat Electronics Limited played the lead bidder, he alleged. "Despite the charges of corruption levelled against the chief minister, he is yet to break his silence," he said and added that the Opposition planned to release more documents and move the court challenging the contracts.

Long Shadow of Sivasankar, SRIT

In the budget for 2017-2018, then finance minister T M Thomas Issac declared the internet as a basic human right of Keralites and announced that the government would set up a fibre optic network across the state in 18 months.

The declared aim was to give internet access to 20 lakh less-privileged persons and 30,000 government offices, free of cost.

In May 2017, the Kerala government gave administrative sanction for the Kerala Fibre Optic Network (K-FON) project at an estimated cost of Rs 1,028.20 crore.

A year later, in May 2018, Kerala State IT Infrastructure Limited (KSITIL) and government power distribution company KSEB formed a 49:49 joint venture K-FON to roll out the project. The remaining 2 per cent is with the state government.

In June 2018, KSITIL floated the tender for the project. The bids were opened in December and the lowest bidder was from a consortium led by Bengaluru-based Bharat Electronics Limited (BEL). It had bid Rs 1,626.35 crore for the project for which the government had sanctioned only Rs 1,028.20 crore, which is an excess tender of 58 per cent or Rs 598 crore.

The other members of the BEL-led consortium were RailTel, another central PSU which provides internet in railway stations (Railwire), South Korean optical ground wire company LS Cable and System, and Bengaluru-based SRIT Private Limited, which is linked to Uralungal Labor Contract Co-operative Society (ULCCS).

SRIT had also won the bid for AI traffic cameras, being implemented under the Safe-Kerala scheme.

After the bids were opened in December 2018, the government said the K-FON project had two packages: Package A was the K-FON project and the bid amount was Rs 1,548.68 crore, and Package B involved setting up a 'reliable communication and data acquisition network' for KSEB but it is "essential for the completion of KFON network".

The project cost for Package B amounts to Rs 79.67 crore and KSEB will fund it.

From the Rs 1,548.68 crore, the BEL consortium gave a discount of Rs 17 crore, bringing down the cost of 'Package A' to Rs 1,531.68 crore, which is 50 per cent more than the amount sanctioned by the government, said Satheesan. According to a government order issued by the then finance secretary K M Abraham, who is now heading KIIFB, the lowest bid cannot exceed 10 per cent of the sanctioned amount, he said.

If that is the case, the government should re-tender the project or come up with a new estimate for the project, he said.

But in February 2019 -- two years after K-FON was first announced -- tainted IT secretary M Sivasankar wrote to the managing director of Kerala State IT Infrastructure Limited to not wait for the government order and issue the 'letter of intent' to the BEL-led consortium at the earliest. "Detailed government orders will be issued subsequently after examining whether the administrative sanction has to be revised in the first phase," he wrote in the note.

To justify the urgency, Sivasankar wrote: "The project cannot be held up any longer awaiting procedural compliances. Considering the fact that election notifications are likely to be issued shortly and that award of contracts can't be done once the notification is issued, an immediate decision is required. Moreover, we would need to make full use of the working season from February to May (pre-monsoon) effectively, if the project is to be completed within 18 months," he wrote.

The urgency to issue the letter of intent is not seen on the ground. "Eighteen months! Nearly six years after K-FON was announced, people are yet to get free internet," said Satheesan. On top of that, the government has reduced the targeted number of beneficiaries to 14,000 from 20 lakh people, he said. "That is just 100 people in each Assembly constituency," he said.

Sivasankar keeps his word, accepts 'inflated cost'

Sivasankar, however, kept his word given to KSITIL managing director in February 2019. In November 2019, the Electronics and Information Technology Department issued a government order accepting the bid amount of Rs 1,531.68 crore for K-FON. The order was issued by Secretary M Sivasankar.

To justify the 50 per cent increase in cost, the order said the initial estimate of Rs 1,028.20 crore did not include the operation and maintenance cost for seven years.

But the same order said the operation and maintenance cost for seven years is Rs 428.85 crore, inclusive of taxes. That is, if the 18 per cent tax is reduced, the maintenance cost for seven years would come to Rs 351.66 crore. That should take the cost of the project to nearly Rs 1,380 crore. But the tender amount sanctioned was Rs 151.68 crore or nearly 11 per cent more, without including the KSEB's share of Rs 79.67 crore.

The order said KIIFB would lend only Rs 1,061.73 crore or 70 per cent of the cost of the project.

The special purpose vehicle (SPV) formed by KSEB and KSITIL will have to foot the maintenance cost of Rs 428.85 crore. The remaining amount of Rs 336.15 crore will be provided to the SPV as equity.

Presadio comes into play

After winning the bid for K-FON, SRIT Private Limited in October 2019 sub-contracted the laying of cables to Ashoka Buildcon for Rs 314 crore.

Mumbai-registered Ashoka Buildcon is a bridges and highways developer.

The following month, Ashoka Buildcon tapped Presadio Technologies to supply and install cables and pre-fabricated shelters for K-FON.

According to one purchase order accessed by Onmanorama, Ashoka Buildcon has given a work order worth Rs 9 crore to Presadio, based in Kozhikode.

Presadio director Olenchery Bhaskaran Ramjith's phone was switched off. Another director switched off his phone after sharing Ramjith's number.

BJP leader Shoba Surendran alleged that Ramjith was a benami for Prakash Babu, who is the father-in-law of Chief Minister Pinarayi Vijayan's son Vivek Kiran Vijayan.

When contacted, an official of Ashoka said the company selected Presadio after following the due process of seeking three or more quotations. But he said Presadio was not an original equipment manufacturer for the items bought from them.

To be sure, in the AI camera tender, which was bagged by SRIT for Rs 232 crore, Ashoka Buildcon was one of the three qualified bidders, which led the opposition leaders Satheesan and Ramesh Chennithala to raise suspicion of cartelisation.

SRIT wins bid for Managed Service Provider

Though the project cost of K-FON has gone up by 50 per cent, the government called another tender in February this year to select a company to manage Kerala Fibre Optic Network.

Three companies bid to become the managed service provider (MSP) for K-FON: Cube Fibernet Private Limited, Light Wave Technologies Private Limited, and SRIT India Private Limited. The three companies are RailWire's partners and manage their internet connections in Telangana, Odisha, and Kerala.

SRIT won the bid to manage K-FON for a fee of 10 per cent of aggregate revenue. On top of it, SRIT is eligible for an extra 2 per cent of aggregated revenue as a performance incentive. It can also lease out unused optical fibre or dark fibre. "Here, here the government is the investor. Private companies are the beneficiaries," Satheesan said.