British supplier caught up in Delhi games price-hiking row

British supplier caught up in Delhi games price-hiking row

• Startling disparity in cost of items supplied by ES Group
• Fears for games as organisers' budget balloons

A British event-organising company that works with international stars including Elton John, Rihanna and Green Day has been dragged into the growing number of scandals gripping the Commonwealth Games in Delhi.

ES Group is part of a consortium accused of charging inflated prices for supplying items to the games, which are becoming increasingly mired in controversy ahead of the opening ceremony on 3 October.

The company and its partners charged organisers £64 each for 360 tissue paper dispensers. Comparable items were available for just £9 from another games supplier. It supplied 176 rubbish bins at £104 each, compared with the £16 charged by another group. And the 20 sinks it supplied each cost – at £501 a time – more than double those provided by a rival.

The huge price differences appear to highlight the failure of the games' organisers to keep a check on the budget, which has ballooned from £260m to £1.4bn. The overspending, coupled with growing evidence of corruption, nepotism and shoddy work by contractors, last week prompted the leader of India's ruling Congress party, Sonia Gandhi, to threaten dire consequences for those found to have sullied the country's reputation. "The prestige of the nation is involved," she said.

Allegations of corruption have dogged the games for weeks and have so far led to the suspension of two senior officials and the resignation of a third. Games treasurer Anil Khanna resigned amid claims that the contract for laying tennis courts went to an Australian company headed in India by his son. Veteran opposition politician Lalu Prasad Yadav has described the games as "an organised looting operation".

Large-scale irregularities are suspected at 16 venues, according to the Indian government's own anti-corruption agency, the Central Vigilance Commission. The chairman of the games' organising committee, Suresh Kalmadi, has faced repeated calls to go.

The London launch of the Queen's Baton relay, the traditional curtain-raiser to the Commonwealth Games, is already under investigation after the contract was handed over without tender or competition to a man who is barred as a company director in the UK until 2017. It later emerged that organisers had agreed to pay his company £450 a day for taxis for the event.

Not surprisingly, sponsors have been aghast at the negative publicity. Two companies have withdrawn their sponsorship entirely.

With just six weeks to go until the opening ceremony, Delhi is disfigured by torn-up streets and mounds of rubble. Work is still going on around the stadiums, which were meant to be finished by March but which Commonwealth Games Federation president Michael Fennell last week admitted are still in need of remediation. City officials say many roads will not be surfaced before the middle of September at the earliest, with the possibility that some will have to wait until after the games are over.

Government watchdogs have found that quality certificates for much of the completed work are suspect or faked. Water poured through the roof and walls of the weightlifting stadium during its public handover.

Four groups were selected to fit out the stadiums with non-permanent items known as overlays. ES Group won a £20m contract under the name ESAJV D Art Indo, covering three venues, a temporary stadium for the rugby and 18 training facilities. An inventory of these items seen by the Observer shows huge variations between the amount charged by the different groups for comparable items. In some areas, ES is markedly cheaper, but in others its prices are inexplicably higher.

Approached by the Observer, the company refused to comment. In a statement, Liz Madden, its head of sales and marketing, said: "As is the case with all major international sporting events, the Delhi organising committee has imposed very strict confidentiality clauses in the contracts. For this reason we are unable to discuss the terms of our agreement."

The organisers will only say that the four bids came in lowest over all. It therefore remains unclear how the company was able to convince organisers to pay £129 for each of the 480 liquid soap dispensers it supplied, despite the Swiss group Nüssli charging just £2.57 for comparable items for its three groups of venues. The soap dispensers alone earned ES £61,920.

The 77 pigeonhole cupboards it supplied cost £780 each compared with Nüssli's £251. Nine thousand disposable glasses were charged at 51p each, more than double its Swiss rival's price.

While many international sporting events are dogged by negative publicity and concerns about whether they will meet deadlines only to come good at the last minute, Delhi appears to be in serious danger of bucking the trend. Hopes of recouping up to £14m through merchandising were severely dented when the company awarded the contract pulled out, blaming delays in the launch and calling organisers unprofessional. The organisers hit back by claiming the quality of the merchandise had been poor.

Until Friday morning, the organising committee did not even have a caterer for its venues.

Even the new airport through which the crowds of visitors are expected to pass is struggling. Domestic flights, due to start next week, will not now commence until after the games are over, because of power and water shortages and the failure to complete the new approach road.

India was hoping that its tourist industry would get a shot in the arm from the games but it appears that many would-be visitors have decided to stay away, with guest houses reporting that a lack of bookings is forcing them to close and hotels reporting a marked shortfall in expected visitors.

Indian prime minister Manmohan Singh is taking personal charge of attempts to salvage the games and public pressure is now growing for guilty parties to be punished.