The Tamil Nadu Generation and Distribution Corporation Limited (Tangedco) gave away undue benefits to the tune of Rs. 331.50 crore to a private power generating company, while settling its bills, according to an audit report tabled recently in the Assembly.

Tangedco had made payments towards the cost of naphtha as secondary fuel in the 330.5MW gas-cum-naphtha-fired power plant in Nagapattinam put up by PPN Power Generating Company.

The report of the Comptroller and Auditor General on public sector undertakings in Tamil Nadu for the year ending March 2012 noted that as per the power purchase agreement (PPA) , the payment should have been done on the basis of actual consumption.

The actual consumption of naphtha for power generation during the five year period from 2006-07 to 2010-11 was 11,20,634 tonnes.

Against this, Tangedco paid for 12,01,569 tonnes. The excess payment to the tune of 80,935 tonnes was valued at Rs.331.5 crore.

“The payment for variable fuel cost based on derived consumption of naphtha instead of restricting it to actual consumption had resulted in an undue benefit of Rs 331.5 crore to PPN,” the report said.

Tangedco, in reply to the audit objection, said the prevailing practice in the power sector was that the Station Heat Rate was fixed on a normative basis unless agreed otherwise. It also insisted that the savings between the normative and actual were not passed on to the buyer by the generating company.

The CAG rejected Tangedco’s reply as unacceptable.

The auditor said the power purchase agreement between the government agency and private power producer had a clause relating to annual invoices requiring reconciliation of all payments that were made on estimated basis with the actuals. The purpose of the clause was to adjust excess or short payments.