Gujarat gave Essar Power, Reliance Petroleum undue benefits: CAG

The CAG report for the year ending March 31, 2013 was tabled in the state assembly today

The Comptroller and Auditor General (CAG) has found the Gujarat government extended undue benefits to Essar Power and Reliance Petroleum of Rs 587.50 crore and Rs 362.01 crore, respectively.

The report for the financial year ended March 31, 2013 was tabled in the Assembly on Friday. It pulled up the state government for commitments made in Gujarat’s port policy of 1995 not being implemented 15 years later.

The CAG said the Mundra port in Kutch, envisaged as a joint sector development, had turned private. It added the state government did not follow competitive bidding while divesting its stake in Gujarat Adani Port, promoted by Adani Port and Gujarat Ports Infrastructure Development Company.

State-run Gujarat Vurja Vikas Nigam (GVVN) had changed the delivery point of Essar Power from the Vadinar substation of the Gujarat Energy Transmission Corporation to the Hadala switchyard of Essar Power in November 2009, the auditor said.

"The change of the delivery point after the finalisation of the (2007) power purchase pact led to undue benefit to Essar Power of Rs 587.50 crore," the CAG said. After the change, Essar Power saved Rs 52 crore by not having to put up transmission lines from the switchyard to the Vadinar substation, it added. More, the company saved Rs 21.42 crore a year in line losses.

After a performance audit of the Gujarat Maritime Board over 2008-13, the CAG said, "Undue benefit was extended to Reliance Petroleum by non-recovery of the full wharfage rate after the cost of a captive jetty (Rs 362.01 crore) constructed by it was set off. More, an erroneous calculation of the set-off value and application of an incorrect wharfage rate resulted in short recovery of Rs 649.29 crore from Reliance Petroleum." Reliance Petroleum has a captive jetty with two single buoy moorings at Sikka port in Jamnagar.

The auditor said there was no system developed by the Gujarat Maritime Board for the timely verification of construction costs of assets or monitoring the activities of private port developers. "The penal provisions for violation by developers were ineffective."

The CAG pulled up GVVN  for paying incentives to three power producers on their deemed generation from naphtha-based plants, disregarding a central government notification coupled with belated legal action for recovering the erroneous payments. This led to a loss of Rs 396.39 crore, it added.