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BMC orders probe into carbon credit estimate error

A red-faced Brihanmumbai Municipal Corporation has now instituted an inquiry into IL&FS Environment’s over-estimation of carbon credits that the scientifically closed Gorai dumping ground could produce.

Written by Express News Service | Published: September 25, 2012 2:30:16 am

A red-faced Brihanmumbai Municipal Corporation (BMC) has now instituted an inquiry into IL&FS Environment’s over-estimation of carbon credits that the scientifically-closed Gorai dumping ground could produce. In three years till June 2012,IL&FS had estimated that the solid waste management project at Gorai would generate 3,00,235 CER (Certified Emission Reduction) units,but only 14,477 units were received.

CERs are units issued by the Kyoto Protocol’s Clean Development Mechanism (CDM) Executive Board for emission reduction and can be traded in the international market. In 2009,based on IL&FS estimates,the BMC took an advance payment of Rs 24.5 crore from Asian Development Bank (ADB) to sell 4.3 lakh CER units over a five-year period. ADB is the mediator for the Government of Spain,which had agreed to acquire these carbon credits. The project had won several national and international accolades as a benchmark and replicable project in the waste sector.

Additional municipal commissioner Mohan Adtani told the standing committee on Monday that the civic body has given the evaluating consultant a show-cause notice for incorrect project valuation. “We have asked them to return the Rs 1.5-crore consultation fees paid to them. Meanwhile,we have stopped payments to IL&FS for consultation on the closure of the Deonar and Mulund dump sites,” he said.

IL&FS Environment managing director Mahesh Babu,however,said the quantum of waste available at the Gorai dumping site — the primary parameter for calculating CERs — turned out to be much less that what was given by the BMC initially. Further,the calculation was based on data provided for the project design document (PDD),which was signed off by the BMC,IL&FS said in a statement.

ADB has given the BMC two options: either return the amount,or buy the promised CERs from the open market at the current market price. Adtani said the second option was more viable as the value of carbon credits has fallen in the open market. “In fact,we will still earn a profit,” he said.

Babu said the BMC has already earned Rs 5 crore in interest on the advance amount. “Also,the replacement CERs to be procured will be at a rate which is lesser than what it was when ADB made the advance payment. The current market rate of CERs is significantly lower than that prevailing in 2009,” he said.

Adtani said IL&FS did not take into account the constitution of garbage at the dumping ground while estimating carbon credits. “Processing of debris and plastic,which forms a large portion (of the garbage),will not generate CERs,” he said.

Samajwadi Party corporator Raees Sheikh,who raised the issue in the standing committee meeting,said,“The BMC has ruined its image in the international market. It is morally binding on us that we return whatever accolades we have won.” He also demanded an inquiry into the consulting contract awarded to IL&FS.

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