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CAG questions transparency in power reforms

By Lalit K. Jha

NEW DELHI, JUNE 15. The Comptroller and Auditor General (CAG) of India is learnt to have raised "strong objections" to the system adopted for privatisation of the power distribution network in the Capital by the Delhi Government.

In its annual report for 2002-03, the CAG is also understood to have questioned the transparency in power reforms and the privatisation process carried out by the Delhi Government during this period. Submitted to the then Delhi Lieutenant-Governor, Vijai Kapoor, on May 14, the CAG report has pulled up the Delhi Government for making significant changes in the transfer scheme without the approval of the competent authority. The report is learnt to have suggested that the Government should obtain post-facto approval of the Delhi Lieutenant-Governor to the modifications made in the transfer scheme.

The report is also believed to have criticised the Government for incurring heavy and additional financial liability to the tune of Rs. 6,000 crores, and not defining the "requirement and scope" of work prior to selection and appointment of consultants. As a result, all the offers received could not be evaluated on a "transparently comparable basis", it said. The report would be made public only after it is tabled in the next session of the Delhi Assembly.

Commenting on the Government's decision to increase the financial assistance to the Delhi Transco from Rs. 2,600 crores to Rs. 3,450 crores, the CAG is believed to have said that besides incurring an additional financial burden of Rs. 850 crores, the average consumer tariff would have to be increased in the range of 20 to 30 per cent per annum to cope with the loss. This was against the recommendation of the SBI Caps which proposed that the hike should be to the tune of just 10 per cent.

The CAG report is learnt to have concluded: "Provisions of transfer scheme were substantially modified to allow `additional concession' to discoms, which exposed both the Government and Holding Company to additional liability. Provisions of transfer scheme and other agreements like Bulk Supply Agreement were also not strictly adhered to. There was also a significant dilution in the AT&C (aggregate technical and commercial) loss reduction targets from that originally envisaged."

The CAG report is believed to have stated that in response to an audit query about the basis for valuation of assets, the Delhi Government (October 2003) stated that the details of the calculations were only available with the consultants and not with the Government. The CAG was informed that the consultants did not normally disclose their computer modelling as they regarded it as their business secret.

Referring to the note furnished by the Delhi Government, the CAG in its report is understood to have said: "While the general methodology had been explained, the basic figures adopted, weightages given and assumptions made were not indicated and hence the basis of the final figure of Rs. 3,160 crores could not be verified. The Government has evidently relied solely on the report of the consultant."

Objecting to the significant changes in the transfer scheme without the approval of the competent authority, the CAG is understood to have said that before this the new terms of transfer scheme should have been submitted to the Lieutenant-Governor for approval.

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