The history

The Kerala State Electricity Board (KSEB) signed a memorandum of understanding (MoU) with SNC-Lavalin in August 1995. This time G. Karthikeyan of the Congress Party was the Minister for Electricity. Under the provisions of the MoU, the funds for the renovation were to be arranged by SNC Lavalin from the Export Development Canada (EDC), Canada, and the Canadian International Development Agency (CIDA). The Board did so, ignoring the Central Electricity Authority's (CEA) recommendation that immediate replacement of the generating units at the Pallivasal power station was not called for as the plant was in fairly good condition. The Board undertook a feasibility study on the proposal only in September 1995, by a retired Chief Engineer of the KSEB, who later became a consultant to Lavalin.

Based on the consultant's report and further discussions, the Board signed contracts with SNC-Lavalin to provide technical services for management, engineering, procurement and construction supervision in February 1996, to ensure completion of the projects within three years. This time also G. Karthikeyan of the Congress Party was the Minister for Electricity. The consultancy agreements were converted into fixed price contracts for the supply of machinery and technical services as part of the renovation at a cost of 67.94 million Canadian dollars (Rs 169.03 crores) in February 1997. During this period Pinarai Vijayan was the Minister for Electricity.

The CAG found that Lavalin was only a consultant intermediary and not the original equipment manufacturer and that the supply of goods and services was made by other firms at a much higher cost leading to excess expenditure. According to the CAG, the absence of due professional care in negotiating the foreign loan proved to be detrimental to the financial interests of the Board. The Board also could not ensure the quality of renovation work in the absence of technology transfer and training of its engineers. Owing to various technical defects in the equipment, the generation of power could not be maintained even at the pre-renovation level and the Board had to spend on repairs.

According to the CAG, failure to exclude the fee for technical consultancy from fixed price contracts resulted in an avoidable payment of Rs 20.31 crores, and failure to negotiate and exclude the exposure fee from the loan agreement resulted in avoidable payment of Rs 9.48 crores and future liability of Rs 2.21 crores. In the opinion of the CAG, there was also an avoidable payment of Rs 1.20 crores as commitment fee despite there being committed but unavailed advance.

The CAG found that the Government did not receive Rs 89.32 crores out of the grant of Rs 98.30 crores that was promised for the Malabar Cancer Centre.

On 16 January 2007, Kerala High Court[6] ordered a CBI enquiry into the scandal.

On February 19, 2008, the CBI informed High court of Kerala that the investigation was progressing and said that former Electricity Ministers Pinarayi Vijayan and G. Karthikeyan would be examined at the appropriate time. [7]

On 21 January 2009, the CBI filed a progress report on the investigation in the Kerala High Court. Pinarayi Vijayan had been named as the 9th accused in the case.