Guj govt passed on Rs 587 cr undue benefit to Essar Power: CAG

The state-run Gujarat Urja Vikas Nigam Ltd (GUVNL) passed on "undue benefit" of Rs 587.50 crore to Essar Power by allowing it to change the delivery point of transmission of power to GETCO from its plant, a CAG report said.
The CAG report on the state-run Public Sector Undertakings (PSUs) was tabled in the Gujarat Assembly on the last day of the Budget session today.
The report said, "Fixing of delivery point subsequent of PPA (power purchase agreement) led to passing off undue benefit to Essar Power Gujarat Ltd (EPGL) for Rs 587.50 crore during the tenure of PPA."
The state-run GUVNL had signed a PPA with Essar in 2007 to purchase 1,000 MW of power for 25 years. GUVNL transmits the power to grid with the help of another PSU Gujarat Energy Transmission Corporation Ltd (GETCO), it said.

Essar had agreed to transfer the electricity to a 220 KV Substation in Vadinar, from where, GETCO would transmit the power through its grid, it stated.
However, when GUVNL requested GETCO to evacuate power from Vadinar substation, GETCO said that no such substation existed at Wading, following which Essar agreed to set up a 400 KV substation there.

"The change of delivery point of electricity was approved in 2009. As a result of change in delivery point after signing the PPA, there was a saving of Rs 52 crore, as they were not required to construct transmission lines," the report said.

Essar saved additional Rs 21.42 crore per annum for next 25 years on line losses, it added.
"As a result of bidder (Essar) quoting a delivery point and GUVNL accepting the same without consulting GETCO, there was an undue benefit to EPGL to the extent of Rs 587.50 crore (Rs 21.42 crore per annum for 25 years plus Rs 52 crore), during the tenure of PPA," the CAG report said.
The CAG also pointed out several "irregularities" and "mismanagement" on the part of GUVNL, purchase of power at a high cost, deviation from standard bidding procedures, payment of incentives in contravention to statutory notifications, loss due to non-adherence of provisions in PPA, award of solar power projects to ineligible bidders and excess capacity creation under solar power.