Home / Companies / Reliance Power seeks withdrawal of CAG observation on Sasan

Mumbai: After the government’s review of an earlier permission granted to Reliance Power Ltd (R-Power) for diverting surplus coal from one of its upcoming power projects to another one in its portfolio went in its favour, the firm has written to the Comptroller and Auditor General (CAG) requesting it to withdraw an observation that says the firm may have unduly benefited from the move.

“Since the due process has been followed and CAG’s observations have now been fully acted upon after deliberations and review at the highest levels in the government, it is requested that the audit observations pertaining to Sasan UMPP (ultra mega power project) be dropped," says a letter written by Reliance Group president A.N. Sethuraman to the CAG, dated 7 May.

Mint has reviewed a copy of the letter.

The government’s auditor was studying the decision to ascertain whether it was in keeping with the contract R-Power had signed when it successfully bid for the project. The eGoM had granted a similar approval for use of surplus coal from the Tilaiya UMPP, which was also awarded to R-Power. In October 2011, CAG said the government’s decision had violated bid guidelines and gave R-Power an undue gain of 1.2 trillion.

In March this year, the government auditor trimmed the expected benefit accruing to R-Power to 15,849 crore.

“As informed to you in the exit conference (held by CAG to gather R-Power’s views), the Chitrangi project is still awaiting certain important clearances and hence it may be premature to quantify any benefit due to sale of power using surplus coal," R-Power’s letter states.

CAG had recommended that the government review the permissions granted to R-Power, after which the eGoM met on 5 December and decided to seek the advocate general’s view on the matter.

In its last meeting on 28 April, the eGoM accepted the advocate general’s views that there had been no change in bid conditions after the Sasan UMPP was awarded. It also observed that a consolidated policy would be framed for the usage of surplus coal from UMPPs and permission for the use of excess coal from Tilaiya for other projects would be decided on the basis of this policy. The eGoM had also noted that the advocate general concurred that the decision to allow R-Power to utilize surplus coal from Sasan for another project was a well-reasoned one and in conformity with existing laws and policies.

“With the reported eGoM decision, Tilaiya surplus coal permission will be as per the new surplus coal policy, and hence, it may not be appropriate to quantify any benefit today, of a policy that is yet to be formulated," the letter stated.

Though the firm may have received a reprieve in this matter from the government, it is still to secure the Supreme Court’s approval. Tata Power Co. Ltd, which had also bid for the Sasan project, had challenged the government’s decision allowing R-Power to divert coal and the case is pending in the apex court.

In a statement issued on the same day on which the eGoM accepted the advocate general’s views on the matter, Tata Power said that it believed that the “award of the contract (to R-Power) and the post award changes in terms/basis of the tenders invited had resulted in an arbitrary and discriminatory denial of level playing field to the other bidders."

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.

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