Govt signs power project MoU bypassing financial norms
SURAJ NANDREKAR
Panjim, Feb 5: The Goa Government has flouted all rules, including observations made by the Finance Department, to award a contract to a power developer for setting up power project in Chattisgarh, where the State has been allotted a coal block by the central Government.
The ostensible objective was to access power produced by the developer to augment the State’s power reserves.
The Centre in 2001 had communicated to all States informing that State Government Undertakings are allowed to do mining of coking and non-coking coal or lignite reserves, anywhere in country subject to certain conditions.
While till 2001 to 2007 no Government acted on the communication, in 2008 the Digambar Kamat Government appointed Goa Industrial Development Corporation (GIDC) as the nodal agency for implementing the scheme.
The Corporation thereafter invited Expression of Interest seeking proposals to shortlist a power developer for setting up power projects.
However, at this point of time the Corporation had no mandate to undertake mining activity and it sought an amendment to the object clause of the Corporation to undertake mining activity.
Despite no amendments being made to objective clause, the nodal agency not only went ahead with the selection of the developer i.e – KSK Energy Ventures Ltd but also signed MoU with them before a coal block was actually allotted to the State by the Centre.
This MoU was not approved by the Cabinet nor was it referred to the finance or law departments
The State Finance Department in its observation on the awarding of contract and MoU said that the selection done was only on technical criteria and infructuous.
“Technical parameter is a necessary condition but not a sufficient condition. Financial parameters are crucial for selection of developer. The financial bids that optimize the benefits to the Government and to the public at large should become the basis for selection process”, the Department observed.
“The basis of the bench mark for financial parameters indicated in the MoU is not known”, it further stated.
As per the documents available with Herald, the objective of the Government is to earn revenue from the project and produce power to become self-reliant in power requirement.
However, the Finance Department pointed out “…to achieve these objectives, there is no financial modeling done and revenue streams worked out”.
As per the MoU, the power project SPVs (Special Purpose Vehicle) shall commit to supply 10 per cent of power available or 240 mw whichever is higher at the power project after meeting the obligation to the host State but before selling or supplying the power to any other person.
“While the Government intention is to become self-reliant in power requirement, the reason for fixing only 10 per cent requirement is not known. In fact while the first right of refusal for a part of power generated goes to the host State, the Goa Government should have kept the first right of refusal on the balance power production. Therefore the rationale for only 10 per cent commitment is not clear…” the Finance observations say.
Also, what is pertinent to note here is that according to the MoU, the rate of power supply shall be mutually negotiated and concluded by the parties at relevant time.
“If the Government does not know the cost of power and the private sector has major say in the arrangement than the entire exercise becomes hypothetical”, the observation say.
From the above observation it seems like the entire exercise is infructuous and financial irregularities ruled the day.
