GAIL India slaps show cause on Rolls-Royce

State-owned gas utility GAIL India has slapped a show cause notice on Rolls-Royce for allegedly not disclosing a commission of Rs 30 crore paid to agents in contracts worth Rs 1,639 crore.

 

Rolls-Royce has over the years supplied 63 out of the 72 gas turbines installed on GAIL's nationwide pipeline network.

 

The British company also provides spares and services to the turbines.

 

Unlike the defence deals, PSU tendering allows for commission to be paid to agents but that has to be declared upfront during the bidding process.

 

Sources with direct knowledge of the development said Rolls-Royce allegedly paid a commission of 10-11.3 per cent in 24 spares and services deals to agent Aashmore, Singapore, without declaring the same at the time of bid submission.

 

In another contract for new engines, a fee of 2 per cent was paid to another firm, Infinity, in addition to the pre-declared commission of 2 per cent paid to its authorised spares and service agency Turbotech Energy Services in New Delhi.

 

When contacted, GAIL chairman and managing director B C Tripathi confirmed sending show cause notice to Rolls-Royce.

 

"GAIL has issued a show-cause notice to Rolls-Royce for not disclosing in the bids commission to be paid. Based on their response, further course of action will be taken," he said.

 

An email sent to Rolls-Royce for comments remained unanswered.

 

The show cause by GAIL comes close on the heels of the Defence Ministry putting on hold all deals with Rolls-Royce until investigation into allegations of bribes being paid for supply of aircraft engines, is completed.

 

If allegations are proved, GAIL can black list Rolls-Royce for violating tender conditions for spares and services for its pipeline projects.

 

GAIL has a pipeline network of about 10,800-km, 60 per cent of which transports gas using intermediate compression stations. These compression stations have gas turbine driven generators to deliver gas to customers at required pressure.

 

Of the 72 turbines installed on GAIL pipeline network, 63 are of Rolls Royce make. These engines were supplied by Allison, Cooper-Rolls - both of which were acquired by Rolls-Royce in 1995 and 1999 respectively.

 

Sources said GAIL's maintenance policy states that spares and services for equipment procured have to be provided by original equipment manufacturer (OEM) or OEM authorised workshop.

 

GAIL during 2007-14 had placed as many as 173 orders with Rolls-Royce for spares and services totaling Rs 1,639 crore.

 

Sources said as per government guidelines, bidders have to indicate upfront in their bid the name of Indian agent and commission payable to them.