Lanco Infratech, an infrastructure major promoted by the Vijayawada MP, Mr Lagadapati Rajagopal, is under probe for allegedly reworking insurance deals to claim crores of rupees as reimbursement from state government corporations, official sources said.
The company, which handles mega construction projects for the state government, including the AP Health and Medical Housing and Infrastructure Development Corporation (APHMHIDC), renegotiated premium amounts with insurance companies and pocketed huge refunds. Even Lord Balaji was not spared as one of the Lanco projects now under the scanner relates to the construction of the Vedic University of the Tirumala-Tirupati Devasthanam, sources said.
The premium reimbursements related to the CAR (contractor all-risk) policies that Lanco Infratech had to take for each project as per the tender rules. Under the CAR norms, the contractor company, Lanco Infratech in this instance, would have to insure the entire project and claim reimbursement of premium from the principals, mostly government companies and TTD in one case.
A senior investigator told this newspaper that Lanco Infratech would first negotiate the policy with an insurer and pay up the premium. It would get the premium refunded from the contracting principal. Thereafter it would go back to the insurer to renegotiate the premium, saying it had got a lower quote from a competitor company.
“The insurer agreed to lower the premium and refunded the balance, which Lanco Infratech would not report to the principal and simply pocketed. The government companies have suffered huge losses by paying up higher premiums and this has been going on at least from 2007,” said the investigator, requesting anonymity.
The construction of an integrated educational complex for the Indian Institute of Information Technology (IIIT) at Basar in Adilabad district is a classic case. Lanco had bought insurance cover with the New India Assurance, Basheerbagh, for payment of Rs 1,89,60,000 as premium.
After getting it refunded by the principal, APHMHIDC, Lanco Infratech went back to the insurer to renegotiate a steep drop in the premium. That deal through policy no: 610200/44/08/03/600 00027 yielded Lanco Infratech a refund of Rs 1.53 crore and the government corporation was in the dark. The projects for medical colleges in Ongole and Srikakulam had yielded premium refunds of Rs 17 lakh and Rs 11 lakh respectively.
“Our vigilance officials are probing irregularities,” said the chairman and managing director G. Srinivasan of the United India Insurance Co. Ltd, acknowledging the Lanco scam. UIIC investigators are now busy checking whether some of their own executives had colluded with Lanco Infratech. A few other insurance majors figure in the list of insurers that Lanco had used in its fruitful project deals.
When contacted by this newspaper, Lanco Infratech director (operations) B. Manohar came up with an interesting diagnosis for the muddle. “We negotiate with the insurance companies for reducing the premium for our works taken up in EPC mode. Similarly we negotiated in government contracts also. But because of some communication gap at lower levels there was delay in remitting back the amounts to the government. There is no intention to cheat the government. We will pay back the entire amount refunded to us by the insurance companies.”
Strangely, Lanco woke up to its ‘communication gap’ only after this newspaper started its probe a few days back. The newspaper contacted the Lanco chairman, Mr L. Madhusudhan Rao, for his comments on July 31. His company issued four cheques to the TTD the next day refunding Rs.15,04,188 it had obtained as refund from the insurance company way back in 2007.
The same day, Lanco also wrote to the APHMHIDC asking it to adjust some of the refunds ‘in future bills’.The corporation MD, Mr M. Ravichandra, confirmed receiving Lanco Infratech’s letter on August 1. “But such repayments will not exonerate the company of the mistake it committed,” he said, adding that action would be initiated against the company for holding back premium refunds.
The company, which handles mega construction projects for the state government, including the AP Health and Medical Housing and Infrastructure Development Corporation (APHMHIDC), renegotiated premium amounts with insurance companies and pocketed huge refunds. Even Lord Balaji was not spared as one of the Lanco projects now under the scanner relates to the construction of the Vedic University of the Tirumala-Tirupati Devasthanam, sources said.
The premium reimbursements related to the CAR (contractor all-risk) policies that Lanco Infratech had to take for each project as per the tender rules. Under the CAR norms, the contractor company, Lanco Infratech in this instance, would have to insure the entire project and claim reimbursement of premium from the principals, mostly government companies and TTD in one case.
A senior investigator told this newspaper that Lanco Infratech would first negotiate the policy with an insurer and pay up the premium. It would get the premium refunded from the contracting principal. Thereafter it would go back to the insurer to renegotiate the premium, saying it had got a lower quote from a competitor company.
“The insurer agreed to lower the premium and refunded the balance, which Lanco Infratech would not report to the principal and simply pocketed. The government companies have suffered huge losses by paying up higher premiums and this has been going on at least from 2007,” said the investigator, requesting anonymity.
The construction of an integrated educational complex for the Indian Institute of Information Technology (IIIT) at Basar in Adilabad district is a classic case. Lanco had bought insurance cover with the New India Assurance, Basheerbagh, for payment of Rs 1,89,60,000 as premium.
After getting it refunded by the principal, APHMHIDC, Lanco Infratech went back to the insurer to renegotiate a steep drop in the premium. That deal through policy no: 610200/44/08/03/600 00027 yielded Lanco Infratech a refund of Rs 1.53 crore and the government corporation was in the dark. The projects for medical colleges in Ongole and Srikakulam had yielded premium refunds of Rs 17 lakh and Rs 11 lakh respectively.
“Our vigilance officials are probing irregularities,” said the chairman and managing director G. Srinivasan of the United India Insurance Co. Ltd, acknowledging the Lanco scam. UIIC investigators are now busy checking whether some of their own executives had colluded with Lanco Infratech. A few other insurance majors figure in the list of insurers that Lanco had used in its fruitful project deals.
When contacted by this newspaper, Lanco Infratech director (operations) B. Manohar came up with an interesting diagnosis for the muddle. “We negotiate with the insurance companies for reducing the premium for our works taken up in EPC mode. Similarly we negotiated in government contracts also. But because of some communication gap at lower levels there was delay in remitting back the amounts to the government. There is no intention to cheat the government. We will pay back the entire amount refunded to us by the insurance companies.”
Strangely, Lanco woke up to its ‘communication gap’ only after this newspaper started its probe a few days back. The newspaper contacted the Lanco chairman, Mr L. Madhusudhan Rao, for his comments on July 31. His company issued four cheques to the TTD the next day refunding Rs.15,04,188 it had obtained as refund from the insurance company way back in 2007.
The same day, Lanco also wrote to the APHMHIDC asking it to adjust some of the refunds ‘in future bills’.The corporation MD, Mr M. Ravichandra, confirmed receiving Lanco Infratech’s letter on August 1. “But such repayments will not exonerate the company of the mistake it committed,” he said, adding that action would be initiated against the company for holding back premium refunds.
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