Reliance Power got undue benefit of Rs 29,033 crore: CAG
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Reliance Power got undue benefit of Rs 29,033 crore: CAG

Last Updated: Friday, August 17, 2012, 22:57
 
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Reliance Power got undue benefit of Rs 29,033 crore: CAG
New Delhi: Reliance Power unduly gained over Rs 29,000 crore by diverting surplus coal from mines assigned to its Sasan power project, the CAG said Friday, demanding a review of the decision to give a third coal mine to the project.

The Comptroller and Auditor General of India in its audit report tabled in Parliament said the post-bid concession of allowing RPL to use excess coal from Sasan project mines in its other projects "not only vitiated the bidding process but also resulted in undue benefit" to the Anil Ambani-led firm.

The auditor questioned why a third mine was allocated to Sasan project by snatching it from state-owned NTPC, when it was not established that two previously earmarked mines would be insufficient to generate 3,960 MW of power.

RPL had won the Sasan project in Madhya Pradesh quoting a power tariff of Rs 1.196 per unit in 2006. It got Chitrangi project, to which Sasan coal is being diverted, by bidding a tariff of Rs 2.45-3.702 per unit.

Reacting to the CAG report, Reliance Power Ltd (RPL) said, "Surplus coal has been made possible through use of advanced coal mining technology and large capital expenditure" and claimed no condition was violated "as the bid documents gave the right to the government to permit use of surplus coal".

"The permission to use surplus coal in other projects of the bidder after award of the contract based on acceptance of the lowest tariff, vitiated the sanctity of the bidding process which would result in post-bid concessions to the developer having significant financial implication," CAG said.

"This decision resulted in financial benefit of Rs 29,033 crore with a net present value of Rs 11,852 crore to the project developer (RPL)," the official auditor said.

"A reading of all the clauses in the allocation letters together conveyed that clauses were inserted in the coal allocation letter as a safeguard measure to prevent misuse of coal by the developer," CAG said.

Stating that the government needs to generate confidence among bidders of future ultra mega power projects (UMPPs) of its equity and fairness, the official auditor said allocation of third coal block (Chhatrasal) should be appropriately reviewed.

"To ensure fair play, a level playground and transparency of the bidding process for future developers to derive comfort in government action, the allocation of the third coal (Chhatrasal) be appropriately reviewed," CAG said.

In seeking such action, it pointed to RPL's commitment to source 20 million tons from the two initial blocks which was adequate to feed the Sasan project.

CAG also questioned gaps in bid evaluation criteria, saying RPL was awarded UMPPs on its claims of having experience of developing projects based on additions to the fixed assets, despite the fact that the only capital cost of projects commissioned during the last 10 years was eligible to be counted for project experience.
RPL said the decision of permitting use of surplus coal for power generation has been ratified by EGoM on two separate occasions -- once in 2008 and again in 2012.

It claimed CAG's recommendations of reviewing the decision on surplus coal permission to Sasan UMPP and allocation of coal blocks to Sasan UMPP "has already been implemented by Government of India".

"Audit observations do not completely take into account the extant policy and precedents; India's looming coal shortage, and national interest to augment domestic coal production, which were the basis of the decision taken by the Empowered Group of Ministers (EGoM)" allowing diversion of surplus coal, it said.

CAG said the advice of Power Ministry in October 2006 that Sasan UMPP would require an additional coal block was based on insufficient data as mining plan of Moher and Moher-Amlohri Extension was not available.

Also, the condition purportedly permitting diversion of surplus coal was not explicitly stated in the bid document and "the EGoM evidently was not provided accurate information about adequacy or otherwise of coal availability in the two blocks initially allocated to Sasan UMPP leading to their decision permitting usage of surplus coal," it said.

"Permission to utilise surplus coal for projects with tariff-based competitive bidding has been violated since tariff for Chitrangi Project, for which permission was granted, was already fixed before the permission was granted," it said.

CAG said RPL was awarded UMPPs as it "claimed having experience of developing projects based on additions to the fixed assets (Rs 3,123.88 crore for Sasan and Mundra, Rs 2,137.49 crore for Krishnapatnam and Rs 2,254.61 crore for Tilaiya UMPPs) during the last 10 years, despite the fact that only capital cost of projects commissioned during the last 10 years was eligible to be counted for project experince."

The audit estimated the financial benefit that will accrue to RPL on the basis of comparison of tariff of Sasan project (Rs 1.196 per unit) with that of Chitrangi project (Rs 2.450 for Madhya Pradesh and Rs 3.702 for Uttar Pradesh).

"Government needs to generate confidence among bidders of future UMPPs of its equity and fairness," it said.

PTI


First Published: Friday, August 17, 2012, 14:44


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