Rs.2.61 crore loss in Himachal power project: CAG

Shimla: State-run Himachal Pradesh Power Corporation showed undue favour to a private contractor during 2009-10 which led to a loss of Rs.2.61 crore to the exchequer, the CAG has said.

The power corporation, executing the 111-MW Sawara Kuddu Hydro Electric Project in Kinnaur, funded by the Asian Development Bank (ADB) favoured Patel Engineering Ltd., it said in a report Tuesday, which was tabled in the assembly.

The Bharatiya Janata Party was ruling Himachal Pradesh during that period.

The Himachal Pradesh Power Corporation Ltd (HPPCL) did not recover mobilisation advance in a time-bound manner from the contractor which resulted in undue benefit of Rs.2.61 crore to Patel Engineering Ltd., the Comptroller and Auditor General of India (CAG) said in its report.

It pointed out that non-insertion of a provision for recovery of advance at a specified period in the agreement had led to extending favours to the contractor.

“It’s a violation of the Central Vigilance Commission (CVC) guidelines,” it said.

The CVC guidelines say the payment of mobilisation advance to a contractor should be need based and its recovery should be time based and not linked with the progress of works for ensuring recovery of advance.

The HPPCL awarded the works relating to the construction of the project in Kinnaur at a cost of Rs.283.49 crore in August 2009.

As per the agreement, says the CAG, an interest-free mobilisation advance aggregating Rs.14.17 crore was allowed to the contractor in three instalments between 2009 and 2010, which was released as per stipulated time schedule, against bank guarantee of the corresponding amount but its recovery was linked with the progress of work/certified interim payment exceeding 30 percent of the accepted contract amount.

The CAG observed that the entire amount of the advance was allowed to remain with the contractor till Nov 23, 2011, without any recovery as it had failed to execute specified 30 percent quantity of the work.

“The delay in adjustment of advance assumes significance at the HPPCL has been borrowing funds for the project execution from the ADB at the rate of interest of 10 percent per annum. This resulted in granting undue financial benefit of Rs.2.61 crore to the contractor,” it said.

It observed that the recovery of interest-free mobilisation advance should be on monthly basis, especially when the advance has been released from the interest-bearing borrowed fund, and not to be linked with the progress of the work.


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1 Comment

  1. says: D K Sharma

    Sawra Kuddu project is in Rohru area of Shimla district on the Pabbar river. It is not in Kinnaur distirct as reported in the post. As to the issue of reported loss to public exchequer, as long as the Action Taken Reports on the CAG’s observations are not made time bound, such advertant/inadvertant lapses will continue to occur.

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