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LATEST NEWS UPDATES | Reliance Power got undue benefits in bidding for ultra mega power projects: CAG

Reliance Power got undue benefits in bidding for ultra mega power projects: CAG

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published Published on Aug 18, 2012   modified Modified on Aug 18, 2012
-The Economic Times

The CAG has questioned the eligibility of the Anil Ambani-led Reliance Power to have bid for any of the three ultra mega power projects (UMPPs) and said the company would enjoy undue benefits of Rs 29,033 crore over 20 years by using surplus coal at another plant. 

The CAG said that to be eligible to bid for a UMPP, a company should have implemented projects worth Rs 3,000 crore in the last 10 years including one project of more than 500 crore. However, CAG estimated that out of investment of Rs 4,416 crore claimed by Reliance Power while bidding for the Sasan project, only Rs 1,292 crore was "admissible experience" while the rest "may not conform to the stipulated qualifying requirements". 

Company's chief executive officer J P Chalasani claimed that Reliance Power met technical eligibility criteria and CAG calculations are erroneous as there was no undue benefit to Reliance Power. Company officials said Reliance Power's eligibility was also certified by its auditors. 

Power Minister Veerappa Moily said CAG was informed of the decision and all relevant papers including legal opinion given by the Attorney General of India were sent. "CAG has not taken cognizance of all these relevant facts in its final report," he said. 

The auditor also said the permission granted in 2008 to Reliance Power to use surplus coal from Sasan for its Chitrangi project in Madhya Pradesh "vitiated the sanctity of the bidding process." The special dispensation was unfair, as other developers were not explicitly told about the provision, it said. The company was allowed to divert surplus coal on the condition that the energy so produced will be sold on tariff to be derived under competitive bidding. 

The CAG said power from the Chitrangi project would be sold at Rs 2.45/unit to Madhya Pradesh and Rs 3.7 per unit to Uttar Pradesh. "Comparing the higher tariffs for Chitrangi project to the tariff of the Sasan UMPP, it is seen that the benefit of using surplus coal would not pass on to the consumers in the next 20 years as the tariff for Chitrangi Project had already been fixed as per the bid of RPL," the CAG said. The CAG also said that there was no need to allot three blocks for Sasan project as two would meet its requirement. 

Chalasani said the company had no role in allotting the blocks. "Coal blocks, with reserves of 760 million tonnes, were allotted to PFC in September/October 2006. These were part of the bid documents and were furnished to all bidders. 

Hence, Reliance Power had no role in allotment of coal blocks...," he said.

The Economic Times, 18 August, 2012, http://economictimes.indiatimes.com/news/news-by-industry/energy/power/reliance-power-got-undue-benefits-in-bidding-for-ultra-mega-power-projects-cag/articleshow/1


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