CAG flays Gujarat for creating Rs 473 cr burden on power consumers

Written by Avinash Nair | Gandhinagar | Updated: Jul 26 2014, 02:35am hrs
PowerThe much-hyped solar policy of the Gujarat government has come in for some sharp criticism by the CAG. Reuters
The much-hyped solar policy of the Gujarat government has come in for some sharp criticism by the Comptroller and Auditor General of India (CAG), who has rapped the state for awarding solar projects to "ineligible bidders", and for creating excess burden of Rs 473 crore on power consumers in the state.

"As per the Solar Policy 2009, a maximum of 500 MW solar power generation was envisaged up to March 31, 2014...Against this ceiling of 500 MW, capacity of 958 MW was set up by developers till November 2010, for which GUVNL (Gujarat Urja Vikas Nigam Ltd) signed PPAs (Power Purchase Agreements) on the directives of Government of Gujarat," CAG pointed out in its report on Public Sector Undertakings (PSUs) tabled in the state legislature on Friday.

"GUVNL/GoG... had approved development of solar projects far in excess resulting in purchase of 1,139 million units of solar power in 2012-13 (bought at cost of Rs 14 per unit), against the stipulated 686 million units. This excess purchase of 453 million units led to excess burden of Rs 473 crore and consequently passing of the burden to consumers through increased average cost of power of the GUVNL," the report added.

This was done in "disregard" to the economical mix proposed by GERC (Gujarat Electricity Regulatory Commission). "Capacity under costlier solar power was created in excess of what was required by GERC orders and many developers selected did not satisfy the technical and financial criteria prescribed under the Solar Policy," the auditor observed.

CAG pointed out 10 cases where project developers were allocated projects. The companies who have been named in the CAG report are Rasna Marketing Services Pvt Ltd, Jayhind Projects Ltd, Alex Asatral Power Pvt Ltd, Ganga Entertainment Pvt Ltd, Som Shiva (Impex) Ltd, Responsive SUTIP Ltd, NKG Infrastructure Ltd, Konark Gujarat Pvt Ltd, Sand Land Real Estate Pvt Ltd and Sun Clean Renewable Power Ltd.

"In four of the 10 cases, the object clause of MoA (Memorandum of Association) do developer who were registered under the Companies Act 1956, did not envisage power generation activity to be pursued by them," the report added with an observation that the Gujarat government did not have a mechanism to monitor that incentives availed by solar power developers under Customs and Excise at a later stage were passed on through lower tariff to GUVNL.

CAG also criticised GUVNL's executing a PPA with state run-Bhavnagar Energy Company Ltd (November 2009) for purchase of 500 MW of power from their lignite-based power plant in Bhavnagar. "Such increased levelised tariff (Rs 3.32 per Kwh) will burden GUVNL with an extra purchase cost of Rs 38 crore per annum," it observed.