CAG pulls up OPGC for lapses in coal blending

The Comptroller & Auditor General of India (CAG) has pulled up the Odisha Power Generation Corporation Ltd (OPGC), a joint venture company of the Odisha government and the US based AES, for abnormal delay in procurement and blending of imported coal.

The CAG, in its latest report on state PSUs for the year ended March 31 2012, said, the delay led to non-generation of additional power of 1,099 million units (MU) valued at Rs 251.82 crore.

OPGC operates a 2X210 Mw power plant at Ib Valley in Jharsuguda and procures coal from Mahanadi Coalfields Ltd (MCL) for generation of power, which is sold to the state-owned power trader, Gridco.

In view of low calorific value of MCL coal resulting in recurring generation loss and to avert a crisis due to dropping availability of hydro power, Gridco had requested OPGC in August 2008 to procure imported coal for blending with the MCL coal and agreed to bear its impact on tariff.

Accordingly, the OPGC board of directors decided in August 2008 to import coal to increase power generation. Bharat Heavy Electricals Ltd (BHEL), the original equipment manufacturer of the plant, advised the company to start blending with around 15 per cent imported coal with MCL coal and to increase the blending in steps of five per cent.

The company assessed in February 2010 that there would be an increase in generation by 151 MU during 2010-11 by blending imported coal at 3.75 per cent with MCL coal.

Since the company earns revenue in terms of incentive by way of achievement of plant load factor (PLF) beyond 80 per cent, the blending of imported coal could also fetch an additional incentive.

After Gridco agreed to bear the cost of imported coal, OPGC, in May 2011, placed a purchase order with MSTC Ltd for supply of 50,000 tonne of imported coal. MSTC, however, could supply 21,644.08 tonne by June 2012 of which the company could utilise 16,676 tonne by July 2012.

The CAG in its report observed that despite Gridco giving its consent to bear the cost of imported coal, the company could not procure the same in time. Further audit analysis by the Central auditor during 2010-12 revealed that had OPGC blended 742,000 tonne of imported coal, it could have generated 7,165 MU of power as against the actual generation of 6,066 MU.

This implies a generation loss of 1,099 MU valued at Rs 251.82 crore, OPGC could have also earned an additional incentive of Rs 32.17 crore by achievement of higher PLF.

In July 2012, the OPGC management stated that power purchase agreement (PPA) did not provide for use of imported coal and additional investment towards upgradation of the railway line. It further stated that computation of loss was based on enhancement of PLF which was beyond technical acceptability.

The management's explanation was not acceptable to CAG which held that PPA had allowed the cost of coal delivered at plant site irrespective of imported or indigenous coal. Moreover, incentive accrued due to higher PLF was much higher than the cost of upgradation of railway line.