Coming down heavily on the Ministry of Power and Ministry of Coal for giving post-bid concessions to Reliance Power Limited (RPL) for the 4000 MW Sasan mega power project, the Comptroller and Auditor General (CAG) said this not only vitiated the bidding process but also led to conferring "undue benefits" to the tune of Rs. 29,033 crore to the project developer (Reliance).

It also flayed the Government for allowing Reliance Power to use surplus coal from blocks allotted to Sasan power plant for its other projects. "Permission for use of excess coal by RPL from the three blocks – Moher and Moher-Amlohri extension and Chhatrasal – allocated for the Sasan ultra mega power project (UMPP) after its award not only vitiated the bidding process but also resulted in undue benefit to RPL. To ensure free play, a level playground and transparency in the bidding process for future developers to derive comfort in government action, the allocation of Chhatrasal should be appropriately reviewed," the CAG has stated in its report on "Ultra Mega Power Projects under Special Purpose Vehicles" tabled in Parliament on Friday.

The CAG stated that three coal blocks were allocated to Sasan UMPP to meet its coal requirement of 16 million tonne per annum. In November 2007, Chief Minister of Madhya Pradesh, Shivraj Singh Chauhan requested the Prime Minister to allow Reliance to use the surplus coal from the captive blocks of Sasan UMPP in the power plant being set up by the company at Chitrangi tehsil in the vicinity of these mines. The matter was referred to the EGoM and the issue was deliberated in two EGoM meeting held on May 28 and August 14 of 2008. The EGoM recommended that Reliance be allowed to use the surplus coal from blocks allotted to Sasan UMPP for its other projects where power was sold through tariff based bidding and accordingly permission was granted. "The decision resulted in financial benefit of Rs. 29,033 crore with net present value (NPV) of Rs. 11,852 crore to the project developer," it added.

It further stated that the reading of all the clauses in the allocation letters together conveyed that clauses were inserted in the coal allocation letter as a safeguard measure to prevent misuse of coal by the developer. "The permission to use surplus coal in other projects of the bidder after award of the contract based on acceptance of the lowest tariff, vitiated the sanctity of the bidding process which would result in post bid concessions to the developer having significant financial implication," it said.

The CAG said it was not clear how Power Ministry in October 2006 came to the conclusion that two initially allocated blocks for the Sasan project (Moher and Moher Amlohri) would be inadequate. "The basis on which Ministry of Coal was prevailed upon in October 2006 itself to allot an additional block (Chhatrasal) of coal to Sasan ultra mega power project by de-allocating it from the public sector NTPC is not clear. Till March 2009, Ministry of Coal was taking the stand that coal from two blocks was sufficient for Sasan and there is no justification for allocating a third coal block to the developer.

The CAG estimated that the financial benefit that will accrue to RPL on the basis of comparison of tariff of Sasan project (Rs. 1.196 per unit) with that of Chitrangi project (Rs. 2.450 for Madhya Pradesh and Rs. 3.702 for Uttar Pradesh).

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