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MSERC rejects MeECL’s ‘voucher’ of Rs 1286 cr

State Electricity Regulatory Commission to await audit report on Myntdu-Leshka hydro-electric project

SHILLONG: The Meghalaya State Electricity Regulatory Commission (MSERC) has rejected a request from the Meghalaya Energy Corporation Limited (MeECL) to approve the completion cost of the Myntdu Leshka Hydel project at Rs 1286.53 crore, with the argument that the cost has not been vetted and audited by competent authorities.

An interim order made on the tariff of Myntdu Leshka project on April 10 by the Chairman of the Commission, Anand Kumar, said that the Commission will wait for the report of the independent expert panel and the audited accounts before making any final decision on the matter.

“The Commission will only await the Technical Expert Committee’s report and examine if any further information or data is required. To simply approve it for Rs. 1286.53 crore as prayed for will be an empty formality with no factual or legal ground,” the order said.

Regarding another petition of Meghalaya Power Generation Corporation Ltd (MePGCL) to determine the Annual Revenue Requirement (ARR) of Rs. 237.68 relating to the Myntdu Leshka project for 2014?15 and to fix the tariff, the Commission fixed the ARR provisionally for Rs. 135.54 crore, same as that for 2013?14.

During the hearing, it was also revealed that the cost of the 3rd unit of Leshka project has not been examined, vetted or certified yet by any competent authority as the matter is being looked into by the Government and an expert body is being assigned with the work to look into and assess the cost and time over?run and other financial implications while constructing the project.

“When received, the report of the expert body and also the audit report on expenditure will be scrutinized by the Commission and a final view on the tariff will be taken,” the MSERC order stated.

It was sometime in September 1999 that the Central Electricity Authority (CEA) accorded techno?economic clearance of the two unit project of 2×42 MW at an estimated cost of Rs. 363.08 crore. The project cost underwent revision and in February 2007, CEA vetted it at Rs. 671.29 crore. The completion cost of the project has now been claimed as Rs.1286.53 crore with the addition of the 3rd unit of 42 MW capacity in March 2013 when work was completed and commercial operation commenced from April 2013.

The Commission observed that the 3rd unit did not get approval from any competent authority. CEA expressed its inability to vet the unit. For the commission to be able to determine the ARR and fix the tariff the completion cost of the project is inevitably required, the order said.

The Commission has also made its stand known that it is not within its ambit to approve or vet the cost of the project at Rs. 1286.53 crore as it also involves factors relating to hydrological and other technical aspects apart from financial consideration as a whole.

Earlier, during the public hearing held on March 19, a number of consumers and representatives of welfare organizations attended and questioned the cost escalation of the Leshka project.

The officials of MeECL also were present to give clarifications to the issues raised by the participants.

The Meghalaya Pensioners’ Association (MPA) had objected to the proposed increase in retail tariff and felt that Myntdu Leshka project was responsible for the increase because it was servicing the loan component.

The pensioner’s body had also stated that when the generation by the first two units was so low, the addition of the 3rd unit of 42 MW cannot be justified as it leads to a wastage of Rs. 350 – 400 crore of public funds and costs a burden on the public.

However, the reply of MePGCL to the issues raised by the Association was that with three units in operation (3×42 MW), Leshka is designed to generate 486.23 MW of energy in a year but that happens when all the three units run simultaneously during monsoon months.

During lean seasons one of the three units is rested to facilitate maintenance and ensure smooth operation of the system, MePGCL said.

During the hearing, the Civil Society of Women’s Organization (CSWO) was critical of Myntdu- Leshka project and the high expenditure incurred. It charged the Corporation that the 3rd unit was only to cover up the already overshot cost of the project. Inefficiency, mismanagement and other reasons contributed to the escalation of the cost from the initial Rs.363.08 crore to Rs.1286.83 crore, the organization had alleged.

To the objection by CSWO, MePGCL’s reply was that the 3rd unit was constructed in order to optimize the system. The need was felt after liberalization of the industrial policy by the State Government and more power was needed and that scenario changed the ‘power surplus state’ to ‘power deficit state’.

The 3rd unit alone from April 2013 to February 2014 generated 146.53 MW, it claimed.

Regarding the audit, MePGCL clarified that inspection by the Accountant General had been done since 2000 and that it was continuing from year to year.

The Byrnihat Industries Association (BIA) pointed out that Leshka did not submit the audited accounts of the project though the Commission in its tariff order dated March 30, 2013, had directed it to do so, nor was the Technical Expert Committee report on the capital cost made ready and available.

The Association expressed that the capital expenditure shown as Rs. 1286.53 crore was doubtful.

For the anticipated generation of 126 MW, it would have worked out to Rs. 10.21 crore per MW as against the normative cost of Rs. 5.18 crore.

The Association said that there was no justification to revise the tariff for 2014?15.

MePGCL’s response was that the complete cost of the project including that of the 3rd unit would be shown in the audited accounts for 2013?14. As regards the Technical Expert Committee, the Government had constituted it in November 2013 and the report was awaited.

“In the meantime the IIT, Guwahati, was also approached to vet the major part of the project cost,” MePGCL said, adding that capital cost in other hydro projects in other states was either same or even more than the Myntdu-Leshka project.

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