A financial scandal related to a hydroelectric infrastructure contract between the Kerala Government and the Canadian company SNC-Lavalin in 1995 resulted in an alleged net loss to the Indian exchequer of 3,745,000,000 rupees.
The contract outlined the renovation and modernization of the hydroelectric power stations at Pallivasal, Sengulam, and Panniar that were originally installed between 1940 and 1964 in the Idukki district of Kerala, India.
Several politicians were involved and eventually charged in the case, including present chief minister Pinarayi Vijayan, the first ever corruption-related prosecution of a Politburo member of the Communist Party of India (Marxist). However, on 5 November 2013, Pinarayi Vijayan and 6 other accused were temporarily cleared of charges by a Central Bureau of Investigation (CBI) Special Court because "the CBI could not prove any of its charges". The CBI then went on with an appeal in Kerala High Court. On 23 August 2017, The Kerala High Court ruled on the case, and Pinarayi Vijayan was acquitted again. As of 2020 July, CBI's petition against acquittal of Pinarayi Vijayan is pending in the Supreme Court.
History
In 1992, the Central Electricity Authority (CEA) of India rejected a proposal of Kerala State Electricity Board (KSEB) to renovate the three hydro-electric power projects at Pallivasal, Sengulam and Panniar instead the CEA recommended a capacity upgradation of the generators in these three power projects, after they found that these projects were in good condition. KSEB disregarded this recommendation and went forward with the decision to renovate these projects.
Initial negotiations
The initial negotiations with the Canadian company SNC-Lavalin – a company which had been present in the state's power sector for several decades – began during the tenure of United Democratic Front government, under the leadership of the then power minister C. V. Padmarajan and later, the Kerala State Electricity Board (KSEB) signed a memorandum of understanding (MoU) with SNC-Lavalin on 10 August 1995, when G. Karthikeyan of the Congress Party was the power minister, after the resignation of C.V. Padmarajan. Under the provisions of the MoU, the funds for the renovation were to be arranged by SNC-Lavalin from the Export Development Canada (EDC), Canada, and the Canadian International Development Agency (CIDA). Later, it was also found out in a probe by CBI, that G. Karthikeyan also wanted a quid-pro-quo assistance from the Canadian government for the setting up a hospital for granting a project for refurbishment of Pallivasal, Shengulam and Panniyar Hydro electric stations in Kerala, after the revelation of a letter by G Karthikeyan to the then vice-president of Lavalin business operations, Klaus Triendl, who is also an accused in the Lavalin scandal. It was only in September 1995, that the KSEB undertook a feasibility study on the proposal, by a retired Chief Engineer of the KSEB, who later became a consultant to SNC-Lavalin.
Consultant's report
Based on the consultant's report and further discussions, the KSEB under the leadership of G. Karthikeyan, signed the contracts with SNC-Lavalin to provide technical services for management, engineering, procurement and construction supervision on 24 February 1996, to ensure completion of the projects within three years. The consultancy agreement did actually include the rates for various equipments to be purchased as part of the project. Consultancy agreements were converted into fixed price contracts for the supply of machinery and technical services as part of the renovation at a cost of 67.94 million Canadian dollars (Rs 1690.3 million). The final follow-up agreement with SNC-Lavalin regarding the renovation of PSP project was signed by Pinarayi Vijayan of Left Democratic Front – after they took office winning the majority in legislative assembly in 1996 – in February 1997. Technically, the Left Democratic Front (Kerala) led government could not retreat from the agreements, even if they wanted to, according to the provisions of the MoU which was already signed by their predecessors, that is the ministers of United Democratic Front government.
Contract signed
After the final contract was signed, the entrusted the National Hydroelectric Power Corporation Limited (NHEPCL) a study to justify the prices quoted by Lavalin, and they concluded in that study that in view of the grant to the proposed Malabar Cancer Centre (MCC), the purchase of Canadian equipment and accessories could be considered favorably.