Express Investigation: Tweak in Jal Jeevan tender rule removed cap on expense, led to Rs 16,000-crore extra cost

This resulted in additional costs totalling Rs 16,839 crore for 14,586 schemes — an increase of 14.58 per cent from their estimated cost.

Before a tender is issued for a scheme, the government arrives at the estimated cost by adding various project costs including material and labour.

Over the past month, The Indian Express scrutinised details of over 1 lakh schemes for which work orders were issued on or after June 21, 2022, when the rules were amended, to August 3, 2024 when the last set of work orders were recorded on the dashboard maintained by the Ministry of Jal Shakti.

The key findings:

• Of the 1,03,093 listed schemes during this period, in 14,586 schemes, the value of sanctioned work orders after tenders were awarded — known as “discovered cost” — was far higher than the cost estimated by state governments before the tenders were issued. The discovered cost of these schemes was Rs 1,32,307 crore, which is 14.58 per cent higher than the estimated cost of Rs 1,15,468 crore.

• In as many as 6,470, or 44 per cent of these schemes, the discovered cost was at least 10 per cent higher than the estimated cost. The discovered cost was higher than the estimated cost by over Rs 500 crore in three schemes and Rs 250-499 crore in ten — all of these 13 schemes were in Madhya Pradesh. And in 30 schemes across four states, the discovered cost was Rs 100-249 crore higher than the estimated cost.
• Of the 14,586 schemes that recorded an escalation, the discovered cost of 24 schemes was over Rs 1,000 crore each; 33 were in the range of Rs 500 crore to Rs 999 crore; and 133 in the cost bracket of Rs 100 crore to Rs 499 crore.
• A bulk of the cost escalation, i.e., almost 80 per cent of Rs 16,839 crore — was in schemes worth over Rs 100 crore each.
• The escalation was more pronounced in Madhya Pradesh, Maharashtra, Chhattisgarh, West Bengal, Rajasthan, Karnataka and Tamil Nadu.
• Madhya Pradesh accounted for only 508 schemes or less than 4 per cent of the total 14,586 schemes during this period, but contributed almost 64 per cent to the total cost escalation.

These findings are significant in the wake of a Central Government committee led by the Expenditure Secretary recommending a 46 per cent cut in the Jal Shakti Ministry’s demand for additional Central funding of Rs 2.79 lakh crore, and given the unease over some states having approved inflated work contracts.

Tweak in criteria

The “Operational Guidelines for the Implementation of Jal Jeevan Mission: Har Ghar Jal”, issued in December 2019, stated: “In case of any cost escalation beyond the approved cost, it will have to be borne by the concerned State and UTs with legislature and no additional expenditure out of Central share will be permitted.”

Crucially, the 2019 guidelines included the practice of “tender premium” in its “suggestive list of inadmissible expenses”. Tender premium refers to the additional amount quoted by a bidder that is higher than the Government’s estimated cost. In other words, under the original guidelines, states were not allowed to use Central funds to award work tenders at a price higher than previously approved estimated costs.

On June 21, 2022, the Ministry deleted the words “tender premium” from the list of “inadmissible expenses”.

Instead, the amended guidelines stated that the approved cost “shall be the cost as discovered through an open, transparent and competitive bidding process as per prevailing rules”. The new guidelines also stated that wherever the “approved cost” is 10-25 per cent more than the estimated cost at which a tender was invited, approval by the head of the State Level Scheme Sanctioning Committee (SLSSC) should be taken before the contract is sanctioned.

Overall, records show, the 1,03,093 schemes during this three-year period were sanctioned in 600 districts across 30 states and UTs with a cumulative cost of Rs 3,90,732 crore — 47 per cent of the amount that was approved for all schemes in the Mission since its inception.

The Ministry of Jal Shakti did not respond to an emailed questionnaire from The Indian Express on the change in guidelines and the cost escalation. Sources said the Ministry — led at the time by Minister Gajendra Singh Shekhawat — changed the guidelines following demands from several states, including Madhya Pradesh and Rajasthan, citing a rise in cost of materials amid the Covid pandemic.

Since the launch of the JJM in 2019, 6.4 lakh water supply schemes with a total estimated cost of Rs 8.29 lakh crore have been approved by states — more than double the scheme’s original outlay of Rs 3.60 lakh crore, with Rs 2.08 lakh crore from the Centre.

This year, the Jal Shakti Ministry, currently under Minister C R Patil, approached the Expenditure Finance Committee for approval of additional Central funding of Rs 2.79 lakh crore. However, as reported by The Indian Express on April 21, the Committee recommended only Rs 1.51 lakh crore in additional support.