Extremely weak, inadequate
non-audit?
The CAG issued a press release on Aug 31, 2012 for its
“Performance Audit Report No. 10 of 2012-13” of hydropower projects for the
11th 5-year plan ending on March 31, 2012. This CAG audit is an
extremely weak and inadequate work of the CAG. In fact it does not really audit
the performance of hydropower projects at all. The audit fails to raise many of
the fundamental issues related to the hydropower projects. It does not draw
strong enough conclusions that are warranted based on its audit. Its
recommendations are even weaker and do not address the issues raised in the
conclusions. It seems like more of a business as usual, status quoist effort
that does not do justice to the formidable reputation that the CAG has attracted
through some of its exemplary work over the years and recent past.
Firstly, the audit is not much of a performance audit of
hydropower projects or hydropower companies. The basic purpose of hydropower
projects is generation of electricity at stipulated annual, seasonal, daily and
peaking hours. However, the CAG performance audit has not gone into this
question at all at any stage. If it had gone into this, it would have found that
89% of India’s operating hydropower projects generate at below the sanctioned
rates and half of them generate at below the 50% of design rate. It would have
also realised that over the last two decades, generation of electricity per MW
installed capacity has reduced by a huge 20%. The CAG would have also found out
that no one is assessing how much of the power generation from hydro projects is
during peak hours when generation of peaking power is supposed to be the USP
(Unique Selling Proposition) of these projects. Both storage-based and so called
run of the river hydro projects involve huge social and environmental costs,
apart from deforestation and displacement of people. They are justified on the
ground that they meet the peak time demand for electricity. A performance audit
that does not address these aspects is not only incomplete but also misleading.
One of the fundamental issues CAG has refrained from
looking at is the social, economic, environmental, cultural, religious and other
services a free flowing river provides to a large cross section of the society
and how these services are destroyed when a hydropower project is built. Rivers
are functioning service providers, unlike the case of bandwidth (2G licenses)
and coal in the mines, issues on which CAG has rightly shown great concern
recently. It is inexplicable as to why the CAG has refrained from considering
this issue while assessing the efficacy of performance of hydropower projects.
Thirdly, it is welcome that CAG has noted that there has
been lack of “due diligence” and proper “survey and investigation” before taking
up of projects. However, the CAG has not held agencies like Central Electricity
Authority (CEA) responsible for giving concurrence to the projects under
Electricity Act without ensuring that the projects have done full and proper
appraisal. For example, CAG has found in its audit that geological surprises
have been one of the reasons for delays, and that the companies have not been
doing necessary testing. But these are the issues that CEA is supposed to look
into in collaboration with Central Water Commission and Geological Survey of
India. It is clear from the audit that CEA has been routinely giving
concurrences to the projects without ensuring that full appraisal and due
diligence has been done and without any transparency or independent members on
its panel. CAG should have held CEA, CWC and GSI responsible for such flawed
concurrences and should have raised fundamental issues about the process
followed by CEA before giving concurrences. Similarly CAG should have raised
questions about the fundamentally flawed process of environment impact appraisal
followed by the Union Ministry of Environment and Forests (MEF) and MEF’s the
Expert Appraisal Committee (EAC) on River valley projects, but has refrained
from raising them. Why CAG has refrained from reaching such conclusions
logically implied by its audit is surprising.
Fourthly, CAG should also audit the process of
allocation of hydropower projects to private developers. CAG has rightly raised
the issue of competitive bidding in case of bandwidth (2G) and coal recently
while allocating these “natural” resources to private developers, but for some
unknown reason, has refrained from scrutinising the process of allocation of
rivers to private developers for developing hydropower projects, which the
private developers are using for their profiteering. The rivers are society’s
resources and are the biggest natural resource, and it is high time all
concerned including CAG look into these issues. Similarly, why is the CAG not
auditing the accounts of private hydropower developers, when these developers
are using these national natural public resource?
Fifthly, the CAG audit in question has very rightly
raised the issue of failure of monitoring mechanisms and how conflict of
interests prevail in the functioning of hydropower projects, with even an former
power secretary (Mr P Abraham) simultaneously being on
govt committee probing a hydropower project and also on the board of the company
involved in the specific contract being probed. These issues prevail because
there is absolute lack of transparency and lack of presence of independent
credible members monitoring the functioning of these projects and companies.
Unfortunately CAG has not found it necessary to make such recommendations even
though they are clearly warranted from its own audit.
Lastly, CAG's recommendations are peripheral and
pedestrian. They have not addressed the systemic and institutional issues that
are at the root of the problems covered in the audit, however weak it may be.
These issues revolve around the professional capabilities, transparent and
independent functioning of CEA, the role of MOEF and its EAC, the need to ensure
that the composition of EAC and other monitoring and other committees are such
that its members have no conflict of interest in appraising projects and how a
few influential power developers have been able to corner most of the projects
as a result of the non-transparent award procedures adopted. What are proposals
to change the situation in any fundamental way? There are none.
We are therefore forced to reach the unfortunate
conclusion that this CAG audit is highly inadequate, misleading and devoid of
any attention to the basic issues. We would urge CAG to urgently look into the
issues raised and redo the audit keeping these issues in mind.
E A S Sarma,
Former Secretary to Govt. of India, Visakhapattnam, 0986602646, eassarmagmail.com
Bharat Jhunjhunwala, former professor, IIM Bangalore, Dt Tehri, Uttarakhand
bharatjj@gmail.com
