CAG raps Power Grid for inadequacies in pricing methodology in telecom biz

CAG rapped Power Grid for lack of transparency in offering discounts for its telecom business

The Comptroller and Auditor General (CAG) on Tuesday rapped state-run transmission utility Power Grid Corporation for inadequacies in pricing methodology followed by it and lack of transparency in offering discounts for its telecom business.

"Diversification into telecom business by the Company was commendable and enabled the company to operate in two important service areas viz. Power and Telecom. However Audit noticed that PGCIL could not achieve the projected market share in telecom business and though the business has been earning profits since 2009-10, it is yet to achieve payback which was anticipated by 2007," the CAG said in its report tabled in Parliament today.

The CAG observed, "There were inadequacies in the pricing methodology followed by the Company. The multiplication factor adopted to scale up tariff for higher capacities was low, which adversely impacted revenue. Pricing of Indefeasible Right to Use (IRU) contracts was inconsistent with different methods applied for different contracts, leading to lower revenue for the business."

"The discounts offered by the Company on ceiling tariff were neither transparent nor non-discriminatory. Shortcomings were noticed in sharing of revenue with State transmission utilities for using transmission assets for telecom business. The financial impact of observations worked out to Rs 412.88 crore (Rs 399.48 crore related to pricing methodology and Rs 13.40 crore related to sharing of income and allowance of downtime credit)."

The CAG recommended, "The Company may review the multiplication factor for scaling up bandwidth price in line with the TRAI notification. The Company may also frame a uniform pricing methodology for IRU contracts. Transparent criteria for offering discounts to customers may be instituted and uniformly implemented.