The Uttar Pradesh Avas Evam Vikas Parishad suffered a loss of Rs. 1.50 crore interest amounting.

Undue favor extended to the Contractor. The Parishad suffered a loss of interest amounting to Rs. 1.50 crore due to the release of a mobilization advance of Rs. 40.86 crore to the contractor against the provision of the Financial Hand Book and before the necessary Environmental Clearance was received.

Para 456 of Volume VI of the Financial Hand Book (FHB) of the Government of Uttar Pradesh provided that advances to contractors are not allowed except for secured advances not exceeding 75 percent of the value of material brought to the site. Further, Para 457 of FHB provided for advance payment for the work actually executed. As per the Government of India (GoI) notification (September 2006) also, no activity related to Building and Construction projects can be undertaken by the Project Management except for securing the land prior to obtaining the necessary environmental clearance (EC) from the State Level Environment Impact Assessment Authority (SEIAA), where required. Moreover, as per the Central Vigilance Commission (CVC) guidelines (April 2007), Mobilisation Advance (MA) extended to a contractor should essentially be need-based and its recovery should be time-based and not linked with the progress of work.

The Construction Division-15 (Division), Lucknow of the Uttar Pradesh Avas Evam Vikas Parishad (Parishad) entered into an agreement (January 2016) with a contractor for the construction of 1,680 multistoried flats in the Samajwadi Avas Yojna, and 448 multistoried residential flats under the self-financed scheme in Sector-8, Avadh Vihar Yojna, Lucknow for a total consideration of Rs. 408.63 crores. The scheduled dates of start of work and its completion were 27 January 2016 and 26 July 2018 respectively. The Parishad could obtain the necessary EC for construction of the above projects only on 2 September 2016 from the SEIAA, Uttar Pradesh. As per the clauses of the agreement, 10 percent interest-free MA was to be provided to the contractor and its recovery was to be commenced after the completion of 20 percent of the work. Accordingly, Parishad provided an MA of Rs. 40.86 crore to the contractor in three installments from February 2016 to May 2016.

Scrutiny of the records in view of the extant provision of FHB, GoI notification for obtaining EC, and the CVC guidelines revealed (July 2017) the following irregularities:
The FHB prohibited any advances to the contractor except secured advance against material and advance against the work actually executed. Further, the Parishad has no documented policy for providing MA. It has also not obtained any approval or exceptions from FHB provisions from the State Government for providing MAs to contractors. Thus, providing MA of Rs. 40.86 crore to the Contractor was not covered under General Financial Rules applicable in the State.

The Parishad had fixed the date of start of work as 27 January 2016 without obtaining the necessary EC. The Parishad had released 40.86 crore MA to the Contractor in three installments from February 2016 to May 2016 despite being aware of the fact that the necessary EC had not been received, and that no work could possibly be initiated by the Contractor before the EC was received. Audit observed that the Parishad had also released the second and the third installments of the MA (March 2016 and May 2016) without obtaining the utilization certificate for the earlier installments. It was verified by Audit from the records of the Parishad that the Contractor had not commenced any work till 2 September 2016, being the date of approval of EC, on the grounds of non-receipt of the EC. Thus, the grant of MA not only resulted in extending an undue favor to the Contractor but also of the loss of interest, amounting to ` Rs. 1.50 crore.

MA provided to the Contractor was not in consonance with the CVC guidelines (April 2007) also which stated that MA to Contractors should essentially be need-based and its recovery should be time-based and not linked with the progress of work. The Parishad had delayed the adoption of the CVC guidelines by nine years in May 2016. However, the CVC guidelines without being adopted, do serve as best practices and should have been considered in the extant case too.

The Management stated (February 2019) that the MA was released as per terms of agreement for construction of boundary wall, leveling of the site, construction of the store, arrangement of labor, construction of labor hut, and installation of batching plant, etc.

The Government accepted (June 2019) the contention of Audit but it did not indicate action with respect to fixing the responsibility of the concerned officials.

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