A financial scandal related to a hydroelectric infrastructure contract between the Kerala Government and the Canadian company SNC-Lavalin in 1995 resulted in an alleged net loss to the Indian exchequer of 3,745,000,000 rupees.
[1][2] The contract outlined the renovation and modernization of the hydroelectric power stations at Pallivasal, Sengulam, and Panniar that were originally installed between 1940 and 1964 in the Idukki district of Kerala, India.
[3] Several politicians were involved and eventually charged in the case, including present chief minister Pinarayi Vijayan,[4] the first ever corruption-related prosecution of a Politburo member of the Communist Party of India (Marxist).
[1] Based on the consultant's report and further discussions, the KSEB under the leadership of G. Karthikeyan, signed the contracts with SNC-Lavalin to provide technical services for management, engineering, procurement and construction supervision on 24 February 1996, to ensure completion of the projects within three years.
The final follow-up agreement with SNC-Lavalin regarding the renovation of PSP project was signed by Pinarayi Vijayan of Left Democratic Front – after they took office winning the majority in legislative assembly in 1996 – in February 1997.
[3] The Comptroller and Auditor General (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.
The prosecution had failed to establish any dishonest and fraudulent intention, abuse of official position, or element of cheating, which the accused were charged with, Special Judge R. Raghu said in a much-awaited judgment.
The court said the only question that remained for consideration in the case was whether there was any "administrative failure or blunder" that took place "without understanding the ramifications of the offer of grant" from various Canadian agencies in return for the award of the supply contract to SNC-Lavalin.