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Home News Power Sector News CAG effect: cabinet secretariat to seek report on UMPP bid revision

CAG effect: cabinet secretariat to seek report on UMPP bid revision

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CAGThe cabinet secretariat plans to seek a report from the Union power ministry on changes to bid norms for the so-called ultra mega power projects (UMPPs) that allowed Reliance Power Ltd to divert surplus coal from captive coal mines associated with one of the projects to another of its plants. This follows the Comptroller and Auditor General of India (CAG) questioning a ministerial group's decision to allow such diversion by the Anil Ambani-controlled Reliance Group company.

The information update may help the government, which has been buffeted by a series of corruption allegations since last year, to prepare itself for any adverse fallout from the final CAG report, which is expected before the 2012 budget session.

The UMPPs were proposed as showcase projects of the United Progressive Alliance (UPA) government that were meant to generate 4,000 megawatts (MW) each and help bridge the country's yawning power deficit.

Mint reported on 28 September that CAG was looking into the decision to allow Reliance Power to use Sasan coal at Chitrangi, both located in Madhya Pradesh. CAG has since then submitted a follow-up on the audit report, as Mint reported on 16 November.

"The cabinet secretariat will be asking for a status report on the controversy surrounding the UMPPs from the power ministry," said a top government official requesting anonymity due to the sensitive nature of the issue.

The Indian Expressnewspaper reported on 14 November that Prime Minister Manmohan Singh has sought a report from the power ministry on the CAG audit.

Original UMPP norms required that coal meant for use by the project could not be used for other projects owned by the developer. The move to revise this in the case of Reliance Power's Sasan project was taken in August 2008 by an empowered group of ministers (eGoM) headed by power minister Sushil Kumar Shinde and included then finance minister P. Chidambaram​, then law and justice minister H.R. Bhardwaj, then science minister Kapil Sibal​ and deputy Planning Commission chairman Montek Singh Ahluwalia.

To be sure, after deciding to allow the use of surplus coal meant for the Sasan project for another project of the developer, the ministerial group sought to make this the new norm applicable to all UMPPs. It asked the coal ministry to issue necessary instructions to this effect, but this is yet to happen.

A spokesperson for Reliance Power said in an email that there was no wrongdoing involved and that there would be no loss to the exchequer.

The "eGoM's decision to permit use of incremental coal does not result in any loss to the exchequer nor does it confer any undue benefit to the company", the company said. "No commercial conditions were changed subsequent to the award of projects to Reliance Power."

The Sasan project will become operational by January 2013, ahead of schedule, the company said.

Tata Power​ Co. Ltd, one of the losing bidders for the Sasan project, had challenged the step and appealed to the Supreme Court after the Delhi high court upheld the government's decision.

Reliance Power referred to the high court statement in the case that "there is no reason to come to conclusion that eGoM did not act in public interest".

The company is committed to selling power generated at Sasan at Rs1.19 a unit, while it plans to charge Rs2.45 a unit for power produced by its proposed 4,000MW plant at Chitrangi.

A top power ministry official said: "We'll present our views to the cabinet secretariat."

In its report sent to the power ministry, CAG has raised several issues.

Apart from questioning the diversion of surplus coal, it has objected to the decision to allow bidders to develop more than one UMPP, permitting Tata Power and Reliance Power to acquire more land than was required, and effecting changes in bid norms.

The auditor also censured the government for the way it dealt with the consortium of Lanco Infratech Ltd and Globeleq Singapore Pte after it was discovered that they had misrepresented details in their original winning bid for Sasan in 2007. They were subsequently disqualified and the project given to Reliance Power.

This CAG report is a follow-up to an earlier review of the special purpose vehicles of Power Finance Corp. Ltd, the government body appointed by the power ministry to award the projects.

The auditor has cited the diversion of surplus coal from Reliance Power's project at Tilaiya in Jharkhand as well, and pegged losses to the exchequer from both at Rs1.2 trillion.

"The permission to use excess coal subsequent to execution of the contract agreements vitiated the sanctity of the bidding process," CAG said in the follow-up report.

The auditor has also recommended that "the permission to use excess coal in other projects should be reviewed as no benefit on this account was passed to the customers".

The government wants to set up 16 UMPPs; four of these have been awarded-at Mundra in Gujarat to Tata Power, and Sasan in Madhya Pradesh, Krishnapatnam in Andhra Pradesh and Tilaiya in Jharkhand to Reliance Power.

Source- Mint

 

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