New Delhi: In what may increase political problems for the Congress-led Union government, the public accounts committee (PAC) has sought clarifications from the power ministry on a critical report by the country’s top auditor on ultra-mega power projects (UMPPs).
The Comptroller and Auditor General of India (CAG) in a report titled Ultra Mega Power Projects under Special Purpose Vehicles that it submitted to Parliament in August pointed to irregularities in the government’s implementation of the policy related to the 4,000 megawatts (MW) power projects.
The PAC, headed by Bharatiya Janata Party (BJP) leader Murli Manohar Joshi, is the top parliamentary financial committee and its primary task is to oversee the government’s expenditure. It is constituted under the rules of procedure and conduct of business in the Lok Sabha, and has members from both the houses of Parliament.
“The PAC has asked us for clarifications. They haven’t yet asked us to appear before the panel,” said a power ministry official, requesting anonymity. “We have prepared the responses. It is quite an exhaustive list of questions.”
Another power ministry official, who too didn’t want to be identified, confirmed that the PAC has sought exhaustive clarifications.
CAG, in its report, objected to the government’s decision to amend commercial terms after the award of the Sasan project, developed by Reliance Power Ltd (R-Power), to allow diversion of surplus coal, resulting in an alleged benefit of Rs.29,033 crore to the company, Mint reported on 18 August.
CAG also recommended a review of the allocation of the Chhatrasal coal blocks for the Sasan project.
According to the original bidding norms, coal meant for one UMPP could not be used for other projects owned by the successful bidder.
Apart from the power plant at Sasan, R-Power is developing a 4,000MW plant at Chitrangi, in Madhya Pradesh. The firm has committed to sell power generated at Sasan at Rs.1.19 a unit, and plans to sell the power generated at Chitrangi at Rs.2.45 a unit.
“The matter has been taken up the PAC,” a PAC member said, requesting anonymity.
The panel has spelt trouble for the United Progressive Alliance government before with its audit into second-generation (2G) spectrum allocation. Congress members in the PAC strongly disputed the panel’s draft audit report.
Demand for coal in India is expected to grow from 649 million tonnes per annum (mtpa) to 730 mtpa in 2016-17, with the projected local availability at 550 mtpa in that year.
An R-Power spokesperson declined comment.
The auditor in its report also objected to the government’s decisions to allow bidders to dilute equity lock-ins for the Krishnapatnam and Tilaiya projects from 12 years to five years.
It also criticized the decision to allow developers such as R-Power and Tata Power Co. Ltd, which is developing the a UMPP project in Mundra, Gujarat, to reduce equity holding from 51% to 26% after two years of operation.
CAG was also critical of the appointment of audit and consulting firm Ernst and Young (E&Y) as a consultant for awarding the Sasan, Mundra and Krishnapatnam UMPPs, especially because of the manner in which rival consulting firm Icra Ltd was rejected.
“We are not aware of any such development and don’t wish to comment,” Tata Power said in an emailed statement. Questions emailed to E&Y on Monday remained unanswered till press time.
The government wants to set up 16 UMPPs to meet the needs of the country. India has a power generation capacity of 205,340.26MW. While nine UMPPs were originally planned, only four have been awarded—at Mundra, Sasan in Madhya Pradesh, Krishnapatnam in Andhra Pradesh, and Tilaiya in Jharkhand.
Reliance Power has sued HT Media Ltd, publisher of Mint, in the Bombay high court over a 12 May 2010 front-page story in Mint that it disputed. HT Media is contesting the case.