Penalty of Rs 12.60 cr not imposed on defaulting IPPs
Proposals not submitted to MNRE for availing incentives
Mohinder Verma
JAMMU, Apr 4: The Comptroller and Auditor General (CAG) of India has detected that failure on the part of Jammu and Kashmir Power Development Corporation (JKPDC) to evacuate power from hydro-electric project in Ladakh led to revenue loss of Rs 16.45 crore. Moreover, the Corporation failed to impose penalty on defaulting Independent Power Producers (IPPs) to the tune of Rs 12.60 crore even after explicit provision in this regard in the Hydro Policy.
In order to ensure smooth transmission of power from a generating plant to the grid for further transmission/distribution, installation of power evacuation system is required before commissioning of project.
The construction of two hydro-electric projects of generation capacity of nine Mega Watt each at Dah and Hanu in Leh district was awarded in September 2012 to the contractor firm by JKPDC on EPC turnkey basis at a cost of Rs 217.56 crore. An expenditure of Rs 127.70 crore was incurred on execution of the projects after availing loan of Rs 111.50 crore from Rural Electrification Corporation and financial assistance of Rs 16.20 crore from Ministry of New and Renewable Energy (MNRE), Government of India.
The Dah project was commissioned in September 2019 with time overrun of 36 months and Hanu project was under trial run with progress of various components ranging between 87 per cent and 96 per cent in July 2021.
However, during audit it came to the fore that for power evacuation from these projects, construction of Dah-Hanu-Khalsti 66 KV D/C Transmission Line was approved by Board of Directors of JKPDC in March 2017 and Letter of Intent was issued in May 2017 in favour of the contractor firm at a cost of Rs 78.88 crore and the work was to be completed within 12 months—- up to May 2018.
The contractor, however, failed to complete the work as envisaged and the completion date was extended till November 2019 on the grounds of unfavorable weather conditions and closure of road. The contractor, however, did not adhere to the revised schedule of completion and reasons thereof were neither on record nor intimated.
“The progress of construction of transmission line was very poor as completion of tower foundation works ranged between six per cent and 25 per cent, tower superstructure between 60 per cent and 85 per cent till August 2021”, the CAG said, adding “the financial progress of the project was Rs 23.18 crore (29 per cent). Thus, due to failure of the JKPDC in planning construction of power evacuation system in parallel with commissioning of two projects and in ensuring completion of transmission line by the contractor within the allotted timelines, power at Dah hydro project could not be evacuated. This resulted in non-utilisation of power generation of 59.37 Million Units and consequent loss of revenue of Rs 16.45 crore”.
Pointing towards Hydro Policy 2011, which stipulates that failure to meet the timelines fixed for execution of projects by Independent Power Producers (IPPs) may attract a penalty depending on the degree of slippage, the CAG said, “a penalty at the rate of Rs five lakh per MW was to be imposed on the IPP for every month of delay in financial closure before resetting the timelines”.
Failure to meet the timelines may also result in cancellation of allotment and forfeiture of upfront premium amount without any compensation. Moreover, the policy stipulates that JKPDC shall be responsible for executing the Implementation Agreement with the IPP.
However, audit noticed that JKPDC allotted nine projects with potential of 92.50 MW between November 2012 and July 2014. Five IPPs failed to deposit up-front premium of Rs 1.98 crore and did not take up the allotted projects. The timelines for financial closure of remaining four projects which were fixed between May 2015 and January 2017 were not adhered to by IPPs.
However, JKPDC did not invoke penal provisions for delay in financial closure of these projects due to which penalty of Rs 12.60 crore could not be imposed on defaulting IPPs. Further, JKPDC had not executed implementation agreement with IPPs for timely completion of projects as mandated in the Hydro Policy-2011, the CAG said.
As per Small Hydro Power programme of MNRE, projects up to 25 MW are eligible for incentives. JKPDC was supposed to facilitate submission of proposals for obtaining Central Financial Assistance (CFA) from MNRE by the IPP within six months of start of work/six months of receipt of first disbursement from financial institution. The incentives were to ensure economic viability of small and mini/ micro HEPs.
However, audit noticed that three IPP projects with potential of 37.50 MW were completed and commissioned between June 2012 and March 2021 after introduction of Hydro Policy-2011. However, JKPDC failed to submit proposals to MNRE with the result no incentives could be availed from GoI for these IPPs for ensuring economic viability of HEPs.
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