Govt withholds payment to BHEL over Commission issue

The ACC investigation of the BHEL case, while not finding any criminal culpability, said that the appointment of the local agent Bhutan Ventures Trading (BVT) by BHEL for a commission fee cost an additional financial burden of Nu 197.897 mn to the country in buying equipment from BHEL for the 720 MW Mangdechu and 1020 MW Punatsangchu II projects.

The ACC recommended to the government to withhold or stop payments of the remaining commission fee that BHEL is to pay to its local Bhutanese agent, BVT, and to initiate discussions with BHEL authorities to terminate the two agreements signed with BVT.

As per the ACC investigation BVT claimed that it only received Nu 18.80 mn of which Nu 12.17 mn was from PHPA II and nu 6.62 mn from MHPA and after the 2014 media coverage (by The Bhutanese) it did not get further commission

It has been learnt that following the ACC investigation the government has not made complete payment for the Nu 14.6 bn worth of equipment to BHEL for the two projects with the aim of stopping payment of additional commission and also possibly recovering any commission already paid to BVT.

The MoEA Lyonpo Loknath Sharma based on ACC’s recommendation had already followed up with the MHPA and PHPA II to stop any additional payment to BVT.

The MD of MHPA suggested to BHEL to not release any payment to BVT and to initiate the process to foreclose the existing Contract Agreements signed between BHEL and BVT with immediate effect.

The Executive Director of BHEL responded informing that the contract was signed on 9th January 2012 which is presently valid and in-force. The ED said BHEL has taken note of the suggestions and it will be dealt in line with the provision of the contract agreement.

This response from BHEL clearly indicated that it would not stop payment of the Commission which would be from the bills raised to the Bhutanese government.

Now, a senior Bhutanese official in the know said, “There is a substantial amount not released to BHEL due to the ACC and RAA issues. Our projects will not bear this additional amount. What BHEL does with that company is none of our headache but we are not paying such kind of fees. Whether direct or indirect, we will not pay.”

“What BHEL says let them say. From our side we will go by what we have to do and the instructions of ACC, suggestions of RAA and the Public Accounts Committee (PAC). Even if we have to go to the court finally, we don’t care,” said the senior official.

He said, “While BHEL says it will go by the contract with the agent but we have also our own contract.”

The RAA had earlier issued an audit memo to the MHPA for the commission and the memo is still not dropped and is now being taken up by the PAC which called the MHPA for a hearing recently.

The RAA could not catch the commission in the P II project as its tender documents did not require BHEL to reveal a commission agent.

The official said that they would also go by what PAC and the RAA recommends to the government, including possibly recovering the amount already paid.

He said that even if payments are made to BHEL for P II and Mangdechu it would have to be minus the commission amount.

The PAC Chair Phuntsho Rapten said that the PAC meeting with the MHPA was over this audit memo. He said that the issue is not resolved and the MHPA said that there are legal matters involved.

The PAC for now has asked the MHPA to submit a report on its meeting with the RAA and the RAA has been asked to submit its position to the PAC.

The PAC will make the final recommendation based on these documents. The matter will be a part of the PAC report in Parliament.

In January 2012 BHEL and BVT entered into a contract where BHEL promised 1.35 percent commission to BVT on the total sum of Nu 14.6 bn for supply of electromechanical equipment.

BHEL was a monopoly Indian PSU supplier at the time and did not have any competition.

The ACC pointed out that BHEL in the past supplied equipment for Chukha, Kurichu and Tala projects all without involving any local agents.

The ACC found that the post-contract services specified in the agreements with BVT were never actually performed by BVT thereby questioning the credibility of the agreement itself.

Mangdechu update

Meanwhile BHEL’s four turbines and electro-mechanical ran into early problems in Mangdechu this year as one turbine applied the break on itself at full speed damaging it. All four turbines had lubricant oil leakage, water nozzle issues and poor overall computers control system with faulty sensors.

The MoEA minister responding to a question on the issue during the meet-the-press said the ground situation is that BHEL technical person are there in Mangdechu repairing these turbines. By 10th or 12th December all four turbines will be run again to check for issues.

“We have to also be very fair as when even a house is made there will be some glitches. These are huge machines and sometimes it happens. We accept that but we must fix this immediately,” said Lyonpo.

Lyonpo said he has given a mandate to MD of MHPA and JMD and the management that by December end everything must be fixed and MHPA should be ready to handover the project to the DGPC.

“I have also communicated to DGPC to form a team and start the process to take over,” said Lyonpo.

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