For Sasan,RPower included domestic appliances as assets

The bid process for the project has recently run into an audit storm

Written by Subhomoy Bhattacharjee | New Delhi | Published: August 29, 2012 1:12:40 am

To make the bid for the Sasan power better its rivals’,Reliance Power (RPL) included several innovative items as fixed assets. These included “refrigerators and other domestic appliances” that supplemented its experience of running power projects when it bid for the 4,000 MW project.

The items were shown among a host of similar expenditure made by RPL,including electricity fittings in offices and plants,furniture and fixtures and also vehicles to add up the numbers to qualify as a bidder. The bid process for the project has recently run into an audit storm.

Bid process management consultant Ernst & Young had found it difficult to accept some of these numbers as valid experience of developing power projects and rejected Rs 721 crore claimed by RPL in 2006 (which was then known as Reliance Energy Generation Ltd) from the total Rs 2,254 crore of fixed assets submitted by it.

But the ministry of power found nothing amiss in refrigerators and furniture being lumped as part of the experience of the bidder and reinserted them in the qualifying stage.

In response to an email from The Indian Express,an RPL spokesperson replied “In case of Sasan UMPP,Reliance Power Ltd had claimed an experience of Rs 4,416.6 crore (aggregate capital cost),which is more than the bid requirement of Rs 3,000 crore. We have furnished all the details that were required from us including certificates from our Statutory Auditors. The evaluation process was overseen by various committees headed by eminent persons…It was a multi-tier evaluation process which was appreciated by all stakeholders”.

As it turns out RPL claimed it had an experience of Rs 4,416 crore from which the auditors questioned the admissibility of Rs 3,124 crore. The sum allowed was Rs 1,292 crore only,dipping it far less than the qualifying standard of Rs 3,000 crore. So how each element of the asset was treated was quite crucial to the bid.

The numbers as the table shows were not inconsequential. These items made up more than 8 per cent of the fixed assets claimed by of RPL of Rs 2,254.61 crore. Domestic appliances and refrigerators made their appearance in the bid documents as the ministry of power failed to mention in its tender for the ultra mega power projects just what constituted a plausible capital experience. The company had,however,not given any breakdown of domestic appliances or of the other categories that were rejected by Ernst & Young in its bid documents clubbing it in one group and neither did the power ministry find any reason to question those.

It is only now in 2012 after realising the concerns raised in the Comptroller and Auditor General report on “ultra mega power projects under special purpose vehicles” that the ministry of power has begun revising the standard bid documents. Meanwhile,it has already approved for construction four mega power projects of about Rs 64,000 crore. Of these,Mundra was won by Tata Power,while Sasan,Krishnapatnam and Tilaiya were won by Reliance Power.

RPL spokesperson too said the company “is on target to expeditiously complete the Sasan UMPP well in advance of the PPA schedule. The first unit is expected to be commissioned by the end of 2012. The entire project will come up two years ahead of its schedule which proves the execution capability of the company.

Audit officials acknowledge that there is no standard capital requirement that can be specified for projects across sectors. But they were clear that items like those in the table were difficult to reconcile with any capital experience of any project developer.

For all the latest News Archive News, download Indian Express App

Advertisement
Advertisement
Advertisement