Company failed to set up power plant even 10 years after it took possession of site
The Public Accounts Committee (PAC) of the Andhra Pradesh Legislative Assembly has taken serious exception to the allotment of land to the Hinduja National Power Corporation Limited ( HNPCL) by the state government. The committee set up a panel last week to look into the details of the land allotment and submit a report.
The state government entered into an agreement with HNPC on 15 April 1998 and allotted 454.2 hectares of land to HNPCL in Dewada village in Visakhapatnam district in May 1999 for setting up a 1,084 MW coal-based thermal power plant. The deal was fixed at Rs 26.63 crore. The agreement stipulated that financial closure of the project should be achieved within 12 months of the date of agreement and the power project should be completed within 44 months from the date of financial closure. The company paid only 16.42 crore.
- The state government did not ensure that the allotted land was utilised for the purpose for which it was allotted. When HNPCL failed to set up the proposed power project, the government should have taken back the allotted land back. It failed to do that. Instead, it sold the land to the same company at rates lower than the market rates
- Government ignored the requests of public sector units like APGENCO and NTPC for allotting the same land given to HNPCL. NTPC’s request to allot a part of the land to it for the expansion of Simhadri Extension Project was ignored
- APTRANSCO’s requests for inviting open bids from private companies were ignored
- The government neither availed the competitive rates of power tariff offered by public sector units nor did it opt for competitive bidding to get better price for the land
- Legal advice pointed out that the contract with HNPCL was no longer binding because the company failed to pay the full cost of the land and did not fulfill the conditions was ignored
Despite the government not receiving the full amount from HNPCL, the site was handed over to the company. The balance amount towards the cost of land was to be paid not later than six weeks from the date of financial closure. But the date of financial closure was extended from time to time on the request of the company.
The audit scrutiny carried out in 2010 found that the power plant proposed by the Hinduja company has not come up even after ten years and the land remained unutilised with the company. Despite facing serious power shortage in the state, the government did not bother to cancel the deal with HNPCL and take back the land. “One basic flaw in the terms relating to handing over the land to HNPCL was that it linked payment of the balance amount with the financial closure of the project which never took place,” notes the audit report.
Private interest v public interest
In 2007, the government-owned Andhra Pradesh Power Generation Corporation Limited (APGENCO) and National Thermal Power Corporation (NTPC) had sought the same land for a power plant. Requests were also made to the government by the Transmission Corporation of Andhra Pradesh (APTRANSCO) for inviting open bids from private companies to fetch competitive lower power tariffs as against the supply of power by HNPCL on non-competitive rates.
Further, APTRANSCO had also informed the government that four power distribution companies in the state had already signed power purchase agreements with NTPC for supply of power and NTPC had requested the government to provide part of the land allotted to Hindujas for expansion of its Simhadri Extension Project. APTRANSCO had pointed out that NTPC had a proven track record of setting up power plants and supply of power at low cost. But the state government was not ready to explore these options and allowed the allotted land to remain with HNPCL.
The government had received legal advice which categorically stated that as HNPCL had not paid the cost of land in full and also not fulfilled the condition of financial closure within the stipulated time, the contract was no longer binding and it could be viewed as a closed agreement. Though there was breach of contract by the company, the government ignored the legal advice.
Meanwhile, the whole episode of the land allotment took a twist when the Andhra Pradesh Wakf Board moved high court claiming that the allotted land was Wakf land. The verdict of the high court favoured the Board; it confirmed that the title deed was vested with the Wakf Board. Subsequently, the government asked the Wakf Board to sell the land to HNPCL at rates prevailing in 1999. Accordingly, the Wakf Board sold the land for Rs 47.55 crore as against the market value at Rs 224.47 crore in 2007.
When the PAC pointed this out in March 2010 , the principal secretary to the state minorities welfare department replied that selling of land was done under the provisions of the Wakf Act 1995. “The reply of the government is not acceptable as the law clearly stipulates that sale of government property should be done only through public auction,” notes the PAC. The state government’s direction to the Wakf Board to sell the land at old rates without resorting to public auction was inappropriate and was in violation of the law. “Conferring such a benefits to a private company is objectionable as there is no condition stipulating supply of power at rates matching that of APGENCO or NTPC,” observes committee. The state revenue and energy departments did not bother to respond to the committee’s letter pointing out the lapses.
Now PAC has constituted a committee with principal secretary (revenue), energy secretary and principal secretary (minority welfare) as members and has directed them to submit the land allotment details of the Hinduja power project within a month. The PAC has also decided to visit Visakhapatnam on April 23 and 24 to look into the Hinduja project as well as a few other land allotments made by the state government to private parties by flouting rules.
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