CBI to grill Pinarayi in Lavalin case

The scandal had its genesis in a 1996 agreement that the Congress-led UDF Government got the Kerala State Electricity Board (KSEB) to sign with a Canadian power consulting company, SNC Lavalin, for replacing and modernising the obsolete generators in three hydroelectric projects at Pallivasal, Sengulam and Panniar.

Vijayan, as the Power Minister in the EK Nayanar-led Left Government, had led the renegotiation of the contract with the Canadian company, personally leading a KSEB team to Canada, and later accompanying Nayanar there to formalise the deal. The new deal had the state Government agreeing to an additional Rs 149.15 crore for Lavalin to buy the needed equipment from suppliers—Lavalin itself manufactured no such equipment.

The deal set off a big stink soon. It turned out that the Left government had ignored recommendations of its own power reforms expert panel headed by senior CPI(M) leader and former CITU national president E Balanandan. The Balanandan panel had underlined that Lavalin’s costs were excessive and suggested far more effective and cheaper alternatives. One was that the public sector BHEL was equipped and could take up the job at far lesser cost.

The crux of the scandal is, Vijayan, who renegotiated the arrangement with Lavalin that his Congress predecessor G Karthikeyan initiated, had got Lavalin to dole out a Rs 98 crore grant to set up a cancer hospital at Thalassery, home constituency of Chief Minister Nayanar, in return for firming the contract.

This, however, was no legally enforceable deal, and the hospital project eventually got barely Rs 9 crore from Lavalin, which went to a private firm in Chennai, given the job of setting up the hospital building. There is still no track of where the remaining money went, if at all it did come, and if it did not, why not. That apart, the Comptroller and Auditor General (CAG) of India found in 2005 that deal was pushed in undue haste and without due processes, pointing out that the Rs 374.50 crore spent on it was a huge public loss, since the Lavalin had not even notionally increased power generation anyway.

Significantly, the CAG found that power generation had actually fallen afterwards, compared to pre-project output.

Soon after, the Vigilance and Anti-Corruption Bureau found that no tenders were even called before awarding the deal to Lavalin, and the Vigilance department rooted for hauling up the bureaucrats involved in the deal.