Irregularities spotted in Kudankulam n-power project

CAG finds that revenue loss was suffered

GN Bureau | December 29, 2017


#nuclear power   #Kudankulam   #CAG   #nuke   #Nuclear Power Corporation of India Limited  


The Comptroller and Auditor General (CAG) has spotted irregularities in Kudankulam nuclear power projects, units 1 and 2.

 
The scheduled date of completion was postponed from October 30, 2007 to December 31, 2011 for Unit I and October 30, 2008 to December 31, 2012 for Unit II, due to delayed completion of different activities, of which many were attributable to the M/s Atomstroyexport (ASE), a company responsible for undertaking the Russian scope of work.
 
“However, there was no revision of schedule of repayment of the Russian credit. This resulted in start of repayment of Russian credit, before revenue generation, causing an additional interest burden on NPCIL to the tune of Rs 449.42 crore,” said the CAG report
 
Nuclear Power Corporation of India Limited (NPCIL) had to resort to external borrowings at a higher interest rate due to non- provisioning for erection reserve supply contracts while availing Russian credit, which was available at a cheaper rate. This resulted in additional interest cost amounting to Rs 76.02 crore.
 
NPCIL availed term loan of Rs 1,000 crore from HDFC Bank Limited in violation of CVC’s guidelines on tendering, it said.
 
NPCIL, while fixing tariff for power, did not consider two components, i.e., ‘interest on foreign debt’ and ‘interest on domestic borrowings’, though these were actually incurred and paid. This resulted in short realisation of revenue to the tune of Rs 90.63 crore during pre-commercialisation period.
 
The report said that Unit I of KKNPP was shut down from 24 June 2015 to 31 January 2016 for 222 days as against the planned period of 60 days. This was due to decision of NPCIL to shut down the plant and execute the refuelling work on its own without evaluating its technical competency. The extended shutdown resulted in revenue loss of Rs 947.99 crore to the NPCIL.
 
Unit I and Unit II of KKNPP started commercial operation after a delay of 86 months and 101 months respectively. The delays were primarily due to shifting of work from Russian scope to Indian scope; in execution of work and in submission of working documents/supply of equipment/materials by ASE; delays due to design changes; erection delays and additional works. The delay in completion have also resulted in cost overruns. NPCIL did not initiate any claim for recovery of additional expenses of Rs  264.79 crore which were caused due to delayed completion of works by ASE.
 
As against the original value of $29 million (Rs 131.66 crore), NPCIL incurred an amount of $50.91 million (Rs 231.13 crore) for supply of same equipment in a rearranged contract leading to extra expenditure of Rs 99.47 crore.
 
“No claim was raised by NPCIL, on ASE, for turbine of Unit I which was damaged due to manufacturing defects and Rs 12.76 crore was incurred on repairs and replacement of turbine rotors. It also resulted in non- generation of electricity and consequently loss of revenue amounting to Rs 53.73 crore,” said the CAG report.
 
It added that NPCIL neither assessed the extra payment/loss due to non supply/defective supply of materials by ASE nor did it initiate any action for recovery/adjustments for the same.
 
NPCIL did not raise/pursue claims for liquidated damages worth Rs 463.08 crore from ASE even though during the same time, it was borrowing funds and paying interest to discharge debt obligations including from ASE.
 
The work of erection and commissioning of Nuclear Steam Supply System and Turbo Generator was shifted from the Russian scope to the Indian scope for achieving the stated purpose of optimization of man power cost by way of reduction in man-months of Russian specialist for supervision at the site. This was done without any cost-benefit analysis, which not only resulted in delays in completion of the project but also ended up in NPCIL incurring an extra expenditure of Rs 706.87 crore for the work, it said.

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