Govt to look into the various aspects of the BHEL and BVT 1.5% commission deal

The government short of committing to an investigation has said that it will look into various aspects of the 1.5% commission agreed to be paid by an Indian government owned company Bharat Heavy Electricals Limited (BHEL) to a private company Bhutan Ventures Trading (BVT) owned by Sangay Wangchuk. The commission of 1.5% was agreed to in September 2010 for the electro mechanical equipment tender worth Nu 9.50 bn of Punatsangchu II awarded in June 2012 and Nu 6.94 bn for Mangdechu awarded in January 2013.

The Prime Minister Lyonchhen Tshering Tobgay said the Minister for Economic Affairs Lyonpo Norbu Wangchuk is already looking into the issue.

The PM said that depending on any additional information and details they get the government will decide whether to investigate and also to what extent to investigate.

“We don’t know here the information will take us but even if there is a hint of foul play we must investigate,” added the PM.

The Prime Minister pointed out that though trading practices allowed appointment of agents who were paid through different ways including commissions, the government would still need to see whether there was any reason to establish an agent for BHEL in Bhutan.

BHEL is the first Indian government company in Bhutan involved in a monopoly contract, hiring a local agent.

The Prime Minister said, “We will first have to establish if BHEL is legally allowed to have such an agent in Bhutan.”

He said, “We will need to see whether undue influence was exercised by people in the government to appoint particular agents at particular commission rates.”

“BHEL is the sole supplier of equipment for the inter-government projects and so any third party should not compromise the financial aspects of the project and also its character and integrity,” the PM added.

He said that while companies appoint agents it should be not be done through any corruption or coercion.

Lyonchhen said that at the moment the issue was premature as information was just flowing in. He said articles had just been published in the September issue of Enertia and the recent issue of The Bhutanese and he said there was indication that Enertia could publish more in the future. He also said that BHEL had sent in a rejoinder (see separate story on pg 1).

“Having collected all the information we will decide what to do,” said the government.

The PM stressed that Bhutan’s relationship with India is sacred and so the good will and cooperation must be nurtured and nothing must be allowed to undermine the relationship.

He pointed out that the center piece of this relationship is hydropower from Chukha, and that this success in hydropower cannot allow room for any doubt and so it cannot allow any person or organization to undermine this strong relationship built over years in the hydropower sector.

The PM said that the project was being built both with grant money and the money of the people of Bhutan.

For all hydro projects including Punatsangchu II and Mangdechu 70 percent of the money is loan taken by Bhutan from India at an annual 10% interest. Only the rest 30% is grant. The commission of 1.5 % was on the total value of the order which would mean that the Nu 240 mn commission of the Nu 16 bn tender would be composed of 70% loan money to be paid for by Bhutanese tax payers.

The proof of the commission was a so far confidential letter first brought out by an Indian Journal Enertia in its September issue. Despite an, earlier decision to explore allowing other private bidders in Punatsangchu II and Mangdechu all private companies were made ineligible on technical grounds making BHEL a monopoly supplier.

Senior BHEL employees from 2011 onwards had been denying the presence of any local agent or commission arrangement and claiming to be doing all work related to BHEL. Despite BVT’s claims of providing services none of the agencies involved in hydropower development like PHPA, MHPA, DGPC and MoEA had met BVT or its staff in connection with any services with BHEL.

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