CAG raps BHEL for ‘benefiting’ Megha Engineering

The Comptroller and Auditor General of India in its recent report on ‘Competitiveness of BHEL in emerging markets’, has rapped the public sector engineering giant for lowering prices for its boiler and turbine, without due authorisation, benefiting Megha Engineering and Infrastructures Ltd (MEIL). Against own rules The observation relates to a transaction of 2013, when the Hyderabad-based MEIL won a contract to set up a power plant for SPEC Power Pvt Ltd. Megha, in turn, signed up to buy the boiler and turbine machines from BHEL. In April, BHEL agreed to sell boiler and turbine for ₹1,473 crore, whereas in December that year, it lowered the price to ₹1,108 crore. Such downward revision of prices is not illegal, but in this case it violated BHEL’s own internal rule which said that price revisions should be authorised by both the Chairman and Managing Director and Director — Finance of BHEL. The required authorisation was ‘not found on record’, the CAG has observed. The government of India, which responded to audit comments of CAG on behalf of BHEL, had said that MEIL had obtained an offer from a Chinese manufacturer and BHEL had to match it. To this, the CAG has said: “There was no mention of competition from Chinese firm in the price approval note dated November 16, 2013. Thus, the reduction in price was made against non-existent competition.” The auditor has also not accepted the government’s defence that the price was lowered because the scope of work was also reduced, observing that “the reduction in scope was not significant to justify the price reduction.” more at: http://www.thehindubusinessline.com/companies/cag-raps-bhel-for-benefiting-megha-engineering/article9816438.ece