Conventional wisdom suggests that with the Congress-led United Democratic Front Government in disarray, it would be a cakewalk for the CPI(M) in the Kerala assembly elections due next year. Such calculations could go wrong. The Reds, it appears, aren't Messrs Clean. Take the CPI(M) in 2005 and in 1997. Now the party holds the UPA Government to ransom over the disinvestment of BHEL; eight years ago, it ignored the public-sector giant and opted for a Canada-based company for the renovation and modernisation of three hydroelectric power plants in Kerala. In the process, the cash-starved state exchequer suffered a loss of more than Rs 374 crore.

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IN THE EYE OF A SCAM: Vijayan

Hurtling the Left into a crisis is the role of CPI(M) state Secretary Pinarayi Vijayan, widely tipped as the next chief minister. In 1997, as minister for power in the Left Democratic Front (LDF) government, Vijayan had struck the deal with SNC Lavalin Inc, a leading engineering and construction firm. Lavalin, in return, had to mobilise Rs 98.93 crore to set up a cancer hospital in Kannur, incidentally Vijayan's home district.

The story of what could be one of the state's biggest financial scams is revealed in the Draft Review of the state's Principal Accountant General (PAG). Confidential documents in the possession of India Today suggest a series of lapses in the Rs 374.5 crore contract awarded to Lavalin during 1997-2001 when the LDF was in power-no global tender was called, the generators brought in were faulty and excessive commission was paid to the firm. "The entire expenditure was rendered wasteful," says PAG. Apart from that, Lavalin contributed only Rs 8.98 crore to the Malabar Cancer Centre.

Faced with a public outcry, the LDF is trying to brush aside the charges as inconsequential. "It is not a report but a set of queries sent by the PAG to the State Electricity Board," reasons LDF Convener Paloli Mohammadkutty. "The board's answers will clear all doubts. If there are culprits, the Government should take action." In the controversy, the Congress has found a trump card. Says KPCC President Ramesh Chennithala: "Vijayan is the prime culprit. He cannot whitewash the role he himself played."

PROJECT FAILURE

The LDF government gave technical consultancy fees, exposure fees and commitment fees in addition to the fixed price contract. Loss: Rs 30.89 crore Excessive commission was paid to Lavalin. Loss: Rs 4.32 crore The contract was signed without listing the items to be renovated. Loss: Rs 1.84 crore Lavalin mobilised only Rs 8.98 crore of the Rs 98.30 crore it promised to a hospital. Loss: Rs 89.32 crore

Though many fingers are pointed at the LDF, the United Democratic Front is not spared either. The PAG report traces several anomalies to 1991-96 when the Congress government led by A.K. Antony entered into a consultancy contract with Lavalin. The Antony government is faulted on three counts. For taking up the renovation project of the Pallivasal hydroelectric project when the Central Electricity Board had advised against it. Two, for rushing into the deal without conducting any feasibility study. Three, for authorising an engineer who was a consultant of Lavalin to conduct the research.

The Congress blames the hasty deal on the power crisis in the state in summer. "The power situation was so bad that we had to rush," explains G. Karthikeyan, who was minister for power in that government, on why a global tender was not invited. "The MoU with Lavalin came as a package deal with the necessary loan component also being arranged by the consultants."

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DAMNED: The deal didn't serve the dams

Far from applying the brakes on the controversial project, the LDF government, which replaced the Congress in April 1996, pressed on the accelerator. The E.K. Nayanar government converted the Rs 20.31 crore consultancy contract into a full-fledged Rs 250.73 crore "Fixed Price Contract". On top of that commissions and consultancy fees, which were avoidable, were paid (see box). In fact, the Canadian firm's offer was finalised, ignoring the lesser rates offered by BHEL. Says Vayalar Ravi, Congress MP from Kerala: "I respected the CPI(M)'s stand in the BHEL disinvestment issue. But their hand in the Lavalin contract exposes their double standards."

The scandal has come as a godsend to the beleaguered Congress in the run-up to the coming panchayat elections and the subsequent assembly polls. Even the sting of a no-confidence motion moved against the Oommen Chandy Government on July 18 was lost as the UDF legislators turned the tables on the Opposition over the Lavalin scam.

Ironically, not all Marxists in the state are worried. The scam has brought some relief-even cause for cheer-to leader of the Opposition in the Assembly V.S. Achuthanandan. The 85-year-old veteran Marxist leader has been fighting a losing battle against Vijayan in the Politburo and the state. With the needle of suspicion pointing towards Vijayan, Achuthanandan is cleverly turning this into an opportunity to strike back at his bete noire. The Reds have more than one battle to fight. And more than one explanation to give.

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