CAG raps Gridco for undue favour to discoms

CAG says company did not collect \dues regularly despite escrow agreement, resulting in outstanding of Rs 3372 crore

State owned bulk power purchaser Gridco Ltd has drawn flak from the Comptroller & Auditor General of India (CAG) for irregular collection of power dues from the distribution companies (discoms).

“While sale of power is the main revenue source for Gridco, the company did not collect its dues regularly despite escrow agreement, resulting in outstanding of Rs 3,372.29 crore (as on March 2013). The company has allowed rebate of Rs 155.40 crore to discoms without recovering the delayed payment surcharge of Rs 706.80 crore. The company borrowed Rs 4,505.22 crore to pay the generators”, the CAG report on PSUs stated.

On Gridco’s financial position, the central auditor said, the company’s net worth turned negative from 2010-11 and stood at Rs 1,163.95 crore in 2012-13 due to losses during 2009-12. The company was incurring losses due to its failure to increase its revenue.

The audit observed that though an inter-state trading license was a prerequisite for trading of power outside the state, negative net worth of the company rendered it ineligible for obtaining such license. CAG said, Gridco signed power purchase agreements (PPAs) with independent power producers (IPPs) on cost plus route in violation of the Electricity Act, 2003 requiring bidding route. Sub-optimal operationalization of PPAs resulted in payment of higher price to the IPPs to the extent of Rs 554.80 crore, the report said.

Besides, Gridco incurred extra expenditure of Rs 372.70 crore for non-procurement of cheapest hydro power as per merit order policy as well as for procurement of renewable power below the target.