A report prepared by the World Bank's Institutional Integrity Unit has listed "fraudulent and corrupt" practices by private Indian contractors working on national highway projects funded by it, and sought a thorough investigation into the matter.

Contractors paid bribes and gifts, including gold coins, to "influence the actions" of officials and consultants of the National Highways Authority of India (NHAI), says the report dated March 1, 2012.

The finance ministry has sent a copy of the report to the Ministry of Road Transport and Highways. The Indian Express has accessed the report, as well as the letter  dated March 14  sent by the finance ministry to A K Upadhyay, secretary in the road transport ministry.

In its letter, the finance ministry has asked the road ministry to take "appropriate action in the matter, including getting the matter investigated by an appropriate investigative agency... Action taken in this regard may kindly be communicated to the Department of Economic Affairs".

The report, prepared by Christina Ashton-Lewis, regional team leader (South Asia) of the Institutional Integrity Unit, focuses on six areas of "malpractices". Under the scanner are the World Bank-funded Lucknow-Muzaffarpur National Highway project, the Grand Trunk Road Improvement Project, and the Third National Highway Project.

The deadline for the Lucknow-Muzaffarpur highway, for which the World Bank has provided $ 620 million, is June 2012. The other two projects have been completed.

The contractors in question are Progressive Construction Ltd (PCL) and PCL-MVR JV. Senior NHAI officials told The Indian Express that PCL has been engaged in highway projects across India for decades.

Interestingly, the names of the two contractors also figured in the list of "non-performers" tabled in Parliament by the road transport ministry last year in connection with the National Highways Development Project. However, a November 2011 press release on the subject said that "this (the contractors being declared non-performers) had been revoked in March 2011 after their performance improved".

Contacted by The Indian Express, Satish K V, vice-president (Operations) of PCL, said he was unaware of any adverse findings, and that World Bank inspection teams had been coming routinely to their construction sites.

"This comes to me as a surprise. Only last year, the Ministry of Roads made us eligible again for participating in NHAI bids," he said.

The World Bank report lists the following malpractices in different packages of the three highway projects:

* Contractors misrepresented facts on the use of advance paid by the World Bank through submission of fake invoices etc. The financial implications: Rs 14.71 crore.

* The second stage of advances was similarly misrepresented and the money diverted to other projects being handled by the contractors, as well as shown as expenses, in this case, in the Lucknow-Muzaffarpur highway work. The extent of falsification: Rs 14.64 crore and Rs 26.44 crore.

* Fake and forged invoices were submitted by contractors for the World Bank-funded projects to the tune of Rs 2.43 crore and Rs 74.86 lakh.

* For World Bank packages 10 and 12, the contractors paid sums totalling Rs 1.15 crore and Rs 67.39 lakh in a bid to "influence actions" of NHAI officials.

* Contractors spent Rs 9.88 lakh on booking hotels and purchasing expensive gifts, including gold coins, etc for NHAI officials for World Bank packages Nos. 9, 10 and 12.

* Cash disbursements to the tune of Rs 30.82 lakh, again with the aim of "influencing actions" of NHAI officials, paid during execution of packages for the Grand Trunk Road Improvement Project and Third National Highway Project.

* Heavy equipment such as tippers, graders and cranes were diverted to other contractors and not for the stipulated projects. The financial implication: Rs 4.05 crore.

Reached for a comment, Road Transport Secretary Upadhyay said, "We have received some papers from the finance ministry and are looking into them. We will seek a report from NHAI shortly." Top NHAI officials said they had not received a copy of the World Bank findings yet.

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