DMRC ignored MUD suggestion on 7:3 Debt-Equity ratio in the Concession Agreement with Airport Metro – Observes CAG

New Delhi: Comptroller and Auditor General of India (CAG) has pulled up Delhi Metro Rail Corporation Ltd (DMRCL) for not following the Urban Development Ministry’s orders on debt-equity ratio for the Airport Metro project.  As a result, the operator, Delhi Airport Metro Express Private Ltd. (DAMEPL), brought in a paid-up equity of only Rs.1.00 Lakh to operate the project, which had a cost of Rs.5,697 crore.

The Urban Development Ministry had asked DMRC to put in a condition providing for a debt-equity ratio of 7:3 in the concession agreement. But, DMRC did not do so, the CAG pointed out. Concession agreement is the contract between DMRC and DAMEPL.

The Airport Metro project in Delhi, the first metro to be implemented on public-private partnership basis, is under scanner after DAMEPL, a Reliance Infra special purpose vehicle, withdrew unilaterally from the project. Now, DMRC has been forced to operate the loss-making project.  “Audit observed that Ministry’s orders for maintaining debt-equity ratio of 7:3 were neither incorporated in concession agreement nor complied by concessionaire,” CAG said.

Airport Metro operator’s investments went to Reliance Mutual Funds

The CAG also pointed out that investments from DAMEPL’s escrow account went only into Reliance mutual funds, while multiple investments were permitted, including Government securities. These investments were listed in the procedure to operate the escrow account between DAMEPL and Axis Bank, said CAG. In effect, mutual fund schemes of Reliance received Rs.6.01 crore (2009-10), Rs.222.3 crore (2010-11) and Rs.0.55 crore (2011-12), CAG has said.

The audit body also said that DMRC failed to ensure the payments due to it and also withdrawals from escrow accounts, as per agreements.

CAG says DMRC gave undue advantage to Reliance Delhi Airport Metro Express Pvt Ltd

The CAG has pulled up Delhi Metro Rail Corporation for relaxing payment conditions for Rs 448 crore owed by Delhi International Airport Limited (DIAL) in lieu of construction work carried out on Airport Metro Line.

In its report, the auditor said that when the Airport Metro link was envisaged it was agreed that DIAL would pay upfront Rs 350 crore for civil work for the line inside the airport. An Empowered Group of Ministers (EGoM) had approved this plan, the report said.

DIAL then asked DMRC to build a station near National Highway-8 to serve its commercial areas for which it promised an additional Rs 98 crore to be paid in advance. Commercial rights of NH-8 and airport metro stations were given to DIAL.

The CAG observed that DMRC relaxed the terms and allowed DIAL to pay the amount in four instalments, which was in contravention of the government’s approval for the payment of construction costs upfront.

The report said that DMRC had eased the conditions on a request by secretary of the civil aviation.

The CAG also said that while the four instalments had to be paid on the first day of June 2009, September 2009, December 2009 and March 2010, DIAL did not make the payments as per the agreed schedule and an amount of Rs 54.43 crore was still outstanding as on February, 2013.

However, DMRC in its reply to the auditor in October last year claimed that there was no favour or undue advantage to DIAL, the report says it is not clear “why stage payments were accepted, when it was very clear from the conception stage of the project itself that this payment was to be made upfront.”

The CAG report has also found fault with the DMRC for having written a recommendation letter to the customs department which enabled, the Airport metro line operator – Delhi Airport Metro Express Private limited (DAMEPL) to get a benefit of Rs 29.56 crore.