Aurangabad Parallel Water Supply Scheme in DEEP WATER

To overcome the shortfalls in distribution of water, AMC proposed (2005-06) a Scheme of Augmentation of City Water Supply termed as “Parallel Water Supply Scheme” at an estimated cost of Rs.359.67 crore under Urban Infrastructure Development Scheme for Small and Medium Towns (UIDSSMT). GoI sanctioned (June 2009) the project at the same cost, to be apportioned among GoI:GoM:AMC in the ratio of 80:10:10 and released first installment (50 per cent of its share) of Rs.143.86 crore in August 2009. The project cost increased to Rs.638.38 crore due to delay in sanction by the Government. To bridge this gap of Rs. 278.71 crore, AMC decided to take up the Scheme on public private partnership basis and initiated (August 2009) tendering process. Tender to M/s Subhash Project Marketing Limited and consortium including VA-Tech Wabag and National Water and Sewage Corporation was finalised for Rs. 792.20 crore and a Concession Agreement (CA) was entered (September 2011) for a period of 20 years. The GoM also released (May 2011) Rs. 17.94 crore as first installment (50 per cent of its share).

The Concessionaire was to take up the project within six months of signing of agreement by attaining financial closure Provide evidence in a manner reasonably acceptable to AMC that the concessionaire has the funds available (whether by debt or equity) to undertake the project. Such evidence may include, but not be limited to, an executed loan agreement or a letter of commitment from the Sponsors which would be termed as financial closure). As the concessionaire could not achieve the financial closure, AMC granted extensions up to 31 August, 2014 and finally handed over the assets to the Concessionaire (September 2014) inspite of non-achievement of financial closure. The project cost escalated to Rs. 1,018.55 crore as per schedule of rates 2014-15 (Concessionaire share of Rs. 619.02 crore + State Government share Rs. 399.53 crore) from Rs. 792.20 crore.

The scope of work broadly included:
(i) Construction of a new parallel water pipeline of 39.12 km from Jayakwadi dam to major balancing reservoir at Nakshatrawadi and rehabilitation of the existing distribution pipeline of 1,036.35 km of Aurangabad city within three years from the appointed date (01 September 2014 to 31 August 2017) which would be referred to as construction and rehabilitation period. Scrutiny of the records revealed that against Government share of 161.80 crore (Rs. 143.86 crore + Rs. 17.94 crore), AMC released Rs. 20.09 crore to the concessionaire. The concessionaire could invest only Rs.11 crore against the requirement of Rs. 619.02 crore as of March 2016 due to non-achievement of financial closure. The concessionaire could complete only 40 km water pipe line against total required length of 1,075.47 km (April 2016). Of the 40 km pipe line laid, 6.1 km was laid in unauthorized layouts without the permission of AMC at a cost of Rs. 50.19 lakh, while 26.5 km pipeline were laid without conducting hydraulic tests.

(ii) Operation and maintenance of the Aurangabad water supply Scheme in accordance with the service level requirements and undertaking metering, improving billing and collection system for which concessionaire would be paid by AMC, Annual Operation Support Grant (AOSG) of ` 63 crore in the first year and in subsequent years an amount enhanced by six per cent annually up to a period of 20 years plus retention of water user charges at the rates prescribed in CA.

The operation and maintenance of water supply Scheme by the Concessionaire was inadequate(Coverage of water supply connection – 36 and 44 per cent, providing water meter connection – 1.93 and 2.01 per cent against 100 per cent, continuity of water supply only once in three days against 24 × 7 in 2014-16). However, it was noticed that he was paid Rs. 127.16 crore as AOSG. In addition, Rs.43.71 crore was paid as user charges from Collection Account. AMC issued (April 2016) a showcause notice to the concessionaire for his failure to maintain the progress of work as per CA. Finally, as the concessionaire grossly failed to keep up with the terms of the CA, the AMC under clause 34 of the CA terminated (October 2016) the contract with concessionaire. AMC intended to encash the performance security of Rs.79.22 crore submitted (August 2014) by the concessionaire. The AMC could not invoke performance security and take over the project as the concessionaire approached (October 2016) the Bombay High Court (Aurangabad Bench) which, in turn, rejected (24 October 2016) its appeal. Aggrieved by this decision, the concessionaire moved the Supreme Court of India who ordered status quo in the matter on 28 October 2016. Pending the decision of the Apex Court, the work on the Scheme was stopped and expenditure of ` 190.96 Crore(` 127.16 crore as AOSG + Rs.43.71 crore as user charges + Rs.20.09 crore for project) incurred got blocked.

AMC accepted (June 2016) the audit observation. During exit conference held in January 2017, Government accepted the audit observation and no reply was furnished. Thus, even after incurring an expenditure of ` 190.96 crore, the AMC failed to provide water supply services and achieve the prescribe