Board under Maharashtra CM Devendra Fadnavis’ aide flouted norms in multi-crore welfare scheme

Devendra Fadnavis forced to annul project after bureaucrats raise a stinker.

Written by Sandeep Ashar | Mumbai | Updated: October 6, 2016 2:41 am
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Chief Minister Devendra Fadnavis has dropped a multi-crore welfare scheme to offer mediclaim and personal accident insurance to construction workers after the state bureaucracy flagged off irregularities in the appointment of a consultant and a contractor for the scheme.

The state-run Maharashtra Building and Other Construction Workers Welfare Board — now headed by Omprakash Yadav — had kicked off the plan’s implementation before the chief minister’s latest directive. Omprakash, also known as Munna Yadav, is a BJP corporator from Sai Mandir ward in Nagpur municipality, which falls in the Chief Minister’s Nagpur South-West assembly constituency. In the state’s political circles, he is seen as a staunch Fadnavis supporter.

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In June 2015, the CM had handpicked him as the board chairman. The welfare board, which is tasked with the responsibility of providing support to construction workers, had already appointed a brokerage firm and had even selected an insurer for the project. The bureaucracy had pointed out discrepancies in the manner these appointments were made, which led to the cancellation of the scheme.

Fadnavis has now directed officials to provide health cover to construction workers under a universal scheme — the Mahatma Jyotiba Phule Jan Arogya Yojana (MJPJAY) — from October 2, but senior government officials confirmed no inquiry has so far been ordered. When The Indian Express asked the CM whether an inquiry would be launched regarding the irregularities, Fadnavis texted, “We have cancelled it. Had it been accepted, there would have been a loss. The construction workers will be covered under the MJPJAY. for which tenders have already been invited.”

The controversy comes at a time when the BJP is facing flak from some quarters over funding cuts for welfare measures. Data shows the board currently has about 5.10 lakh registered construction workers, of which 2.98 lakh are “live” registrations. The state collects one per cent cess from property developers for funding the board’s welfare activities. The Indian Express has obtained all documents regarding the proposal and the discrepancies found in it under the Right to Information Act. These documents show the board’s now-annulled plan was to insure about 2.5 lakh live registered construction workers in the first phase, for which the government would have shelled out Rs 50.09 crore.

According to the documents, Fadnavis’ decision to drop the scheme was in the backdrop of a report from Maharashtra Labour Commissioner Yashwant Kerure regarding irregularities in the manner of appointment of the brokerage firm and the insurer. Kerure had submitted his first report in this regard on March 14 this year and another one a week later. The state Labour department, too, had red-flagged violations of government norms, documents reveal.

The board, headed by Yadav, had on December 29, 2015, appointed Deccan Insurance and Reinsurance Brokers Private Limited as the broker firm. Shiv Sena’s Rajya Sabha MP Anil Desai has confirmed he was an Employee Director with the firm till October 15, 2012. In his affidavit to the Rajya Sabha that year, Desai had even declared he had “pecuniary interest” in the firm and that he received a regular remuneration of Rs 8.11 lakh per year from it. While the same declaration has also been included in Desai’s subsequent affidavit filed in 2014, the Shiv Sena MP told The Indian Express that “the firm’s mention in the 2014 affidavit was a mistake”. He said, “I’ve already filed an addendum to the affidavit clarifying this. I have no connections with the firm now.” Just as speculation in this regard is rife in political and bureaucratic circles, even Ravishankar Paikakode, managing director, Deccan Insurance, maintained Desai was not connected with the firm now.

Brokerage firm
The Labour Commissioner’s March 14 report found a host of discrepancies in the e-tendering process followed for the appointment of the brokerage firm. It had questioned the decision of the board and former Labour Commissioner H K Jawale’s decision to evaluate interested bidder firms on technical parameters alone. The board’s tender document, which was floated on November 21, 2015, had left out “commercial bids”. Kerure’s report had concluded that this worked in firm’s favour since the commission charged by it remained under wraps. The Labour Commissioner has suggested that the same commission was loaded on the premium amount that the government was to pay.

Incidentally, documents show that appointing a brokerage firm was not a part of the board’s original plan. On July 15, 2015, the board had resolved to issue e-tenders directly for appointing insurers. But this was revised on October 1 after Yadav himself wrote to former Labour Commissioner Jawale making a case for involving a brokerage firm, stating it would expedite settlement of claims. The same letter, which has also been referred to in correspondences between the Commissionerate and the government, had said there would be no need to pay the broker firm, which could collect commission from the insurer. Later, the board’s technical committee — headed by Yadav, and comprising Jawale and Director (Audit and Treasury) — decided to invite just a technical bid.

Earlier, the government had ordered an inquiry into the broker firm’s appointment after the CMO received complaints from BJP MLC Anil Sole and Congress MLA Yashomati Thakur, and an unsuccessful bidder (Prudent Insurance Brokers), in Janaury 2016, alleging irregularities in the appointment.

Thakur, in a letter to the Chief Minister on January 18, even demanded “disqualification and blacklisting” of Deccan Insurance, alleging it had misrepresented facts flouting qualification conditions of the tender. While the tender had mandated presence of claim servicing representatives in all districts as an essential criteria, Thakur submitted documents claiming representatives disclosed by the firm in at least eight district were bogus. The representatives shown were not associated with the firm, she had alleged.

Kerure, who replaced Jawale as the Labour Commissioner in February, wrote to the firm seeking a clarification regarding the allegations. Later after going through the firm’s representation, he wrote to the government saying the firm had admitted that the claim servicing representatives in the districts were not on the company’s roll call, and were employed on a project basis. It added that another mandatory condition flouted was the condition that the employee strength must be above 100.

While the firm countered the latter charge in a subsequent letter to the commissioner on March 19, Kerure went on to submit a second report to the government on March 21, where he stated that the firm hadn’t even submitted work experience certificate of the claim servicing agents while recommending that the government should terminate the firm’s contract. The blame was put on the former Labour Commissioner and the board when the Labour department’s then Joint Secretary Balasaheb Kolse Patil commented on the file on April 6 that “it was necessary to scrutinise all claims the firm made before handing over the appointment letter.”

Own norms flouted
Violating the government norm that all works above Rs 3 lakh must be compulsorily tendered out, the board later opted to invite sealed quotations from just four government sector insurance companies, which the Labour department ruled as a major irregularity. It was on the basis of the quotations that the board accepted the proposal from the New India Assurance Company Limited, on January 18, 2016, for covering 2.5 lakh workers for a collective premium of Rs 50.09 crore. The insurer’s appointment proposal, which was forwarded to the government, was halted, when Balasaheb Kolse Patil commented on the file that “e-tendering the work would be necessary and mandatory”.

Kerure’s report, too, had questioned this violation. Yadav deflected the blame on the government officials who were on the board’s management panel at that time. “Jawale was present for the meeting when the decision was taken. We were advised that inviting quotations for government sector firms was a common practice, which even the board had adopted in the past,” he said.

Kerure’s report also objected to the presence of a “hidden cost component” in the insurer’s quotation. It also found that the firm had introduced a “cap” for certain major illness. Claiming there are a lot of cloud regarding the insurer’s

appointment, Kerure asked the government to reject the board’s proposal.

Divided over face-saver
The Commissionerate and the Labour Department were divided over extending a universal health scheme to construction workers, documents reveal. While Kerure pushed it as a viable alternative, the department had advised the government against it, claiming application of a universal scheme would not qualify as a dedicated welfare measure for construction workers. The government appeared to be caught in a bind over the issue, when Labour department bureaucrats also cautioned that “if a fresh tender were to be invited to appoint the broker firm, the possibility of the appointed firm challenging it legally could not be ruled out”. But while the department had recommended re-negotiations with the broker firm and fresh tenders for the insurer’s appointment, the chief minister backed Kerure’s viewpoint. On June 23, the chief minister convened a meeting with board members, where he ordered discontinuation of the board’s scheme and directed officials to extend cover to construction workers under the MJPJAY.

Orders in this regard were finally issued on September 23, while the scheme was opened to workers from October 2 onwards. Yadav told The Indian Express that he would seek a report to fix accountability on those responsible for the irregularities.