Government set to investigate ‘gold plating’ in stressed power projects
As part of its effort to address the problem of stressed assets in the power sector, the government will investigate whether private developers ‘gold-plated’ project costs to increase the debt component, thereby reducing their equity contribution, said power minister Raj Kumar Singh in his first interview after assuming charge.
The move comes at a time when India is trying to tackle the issue of stressed power assets. According to the Economic Survey, non-performing assets in electricity generation accounted for around 5.9% of the total outstanding advances of ₹4.73 trillion.
In response to a query about whether developers had taken recourse to such malpractices, Singh said, “Absolutely! Goldplating has happened. It (the problem) has happened because of that…They inflated the cost of the land, they inflated the cost of the machinery, etc.”
Mint reported on 4 December 2012 that several private project developers were dressing up their accounts while approaching banks for funding and inflating capital expenditure to increase debt value.
Also, these developers placed equipment orders with manufacturers that quoted inflated order values and later transferred the balance back to the developers.
“There is a need to investigate it. While looking at stressed assets, we will also look at whether any over-invoicing etc. has happened,” Singh added.
A total of 34 coal-fuelled power projects, with an estimated debt of ₹1.77 trillion, have been reviewed by the government after being identified by the department of financial services. Some of the issues faced by these projects include paucity of funds, lack of a power purchase agreements, and absence of fuel secu- rity.
“The focus is on starting the stranded assets which can be run. Some (around 8,000 megawatts) have been cleared from the list of 36,000 megawatts (MW).
More will get cleared. We have called a meeting on 29 November to review the status,” Singh said.
This comes in the backdrop of the recently launched Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya) providing the architecture through which the government intends to reduce import of fossil fuels, boost underutilized power plants and meet its climate change commitments. This, in turn, will reduce India’s energy imports and generate fresh demand for electricity in the country.
Any substitution of fuels for cooking, transportation and heating will improve India’s per capita power consumption of around 1,200 kilowatt hour (kWh), which is among the lowest across the world.
According to the government, the Saubhagya scheme will require an additional 28,000 MW of power, considering an average load of 1 kilowatt (kW) per household for eight hours a day.
NEW DELHI: