Chief Secretary’s Post: A ‘Current’ Reward for ‘$hocking’ Corruption

It probably could rank as one of the biggest loots by an IAS officer, of course in cahoots with conniving politicians, as usual. But not a whiff has been smelt by the Tamil Nadu media.

Mercifully though some enterprising individual has assiduously collected the shocking details and filed a Public Interest Litigation petition in the Madras High Court.

It charges the State’s current Chief Secretary K Gnanadesikan with saddling the exchequer with a humongous loss of Rs 1 lakh crore by stalling power projects and through power purchase agreements at exorbitant rates with private power producers.

Such were the appalling nature of the allegations made in the petition, the Chief Justice felt constrained to direct the Chief Secretary to file a personal affidavit on the issues raised.

The first bench headed by Chief Justice S K Kaul and Justice MM Sundresh also ordered notices to the State Government and TANGEDCO on the PIL filed by a retired Tamil Nadu Electricity Board (TNEB) employee, C Selvaraj, who has sought a court-monitored probe by a Special Investigation Team of the CBI.

Selvaraj has charged Gnanadesikan with creating an artificial power shortage by not implementing the Electricity Act 2003 in letter and spirit. Significantly Gnanadesikan was at the helm of TNEB affairs for over 11 years since 2001, either as a powerful Finance Member of its Board or as the Chairman and Managing Director of the utility.

The PIL points out how a group of officials led by Gnanadesikan prevented new projects from taking off and delayed completion of new projects and in the interim purchased power worth crores of rupees from private power producers at rates as high as Rs 15 per unit.

“State-owned power plants at three places were shut down intermittently to create artificial power demand so as to ensure power purchase for eternity,” the PIL said. It points out that the state-owned utilities can generate power at around Rs 3 per unit.

Besides the TANGEDCO under Gnanadesikan not only willfully delayed projects from taking off, but also failed to penalise erring contractors – BHEL, to whit.

SHEELA BALAKRISHNAN’S ROLE

Looks like that Mr Gnanadesikan was not acting all on his own. There were other facilitators, in higher places, like Ms Sheela Balakrishnan who was instrumental in making him the Chief Secretary.

She stood by him right through his inept but stinkingly corrupt tenure as the Chairman and Managing Director of TANGEDCO, and then paved the way for his elevation as Chief Secretary, it is widely known.

Sheela Balakrishnan bending before DMK Minister Geetha Jeevan

“One cannot fathom as to why Sheela Balakrishnan lobbied so hard for Gnanadesikan, knowing how bad the situation he was in. He delayed power projects, played politics and is now facing serious corruption allegations. He is a liability to the administration,” remarks angrily a recently retired senior IAS officer of the Tamil Nadu cadre.

IAS circles also point out that AIADMK supremo Jayalalithaa had announced a flurry of plans for the power sector, but nothing has materialized so far.

Jayalalithaa had, in her Vision 2023 document, set for her own government a target of generating 20000 MWe of power before 2023. as much as 5000 MWe from the solar power alone.

Sadly though not a single MWe of extra power has been added in her tenure through any projects she launched. Whatever accretion is there is from some long-delayed projects initiated by the previous DMK government.

The ruling dispensation seems blissfully indifferent to the mounting crisis, while Sheela and her acolyte Gnanadesikan are busy making as many bucks as possible in double quick time.

Even the CAG indictments have failed to make any dent in the fortunes of Gnanadesikan.

Below is what the Country’s top Auditor had to say about the commissions and omissions of the TANGEDCO.

Some relevant extracts from the CAG Audit Report on TANGEDCO.

1. The investment in the power sector was the highest which had increased by 409.24 percent from Rs. 15,075.21 crore in 2007-08 to Rs. 76,768.47 crore in the year 2012-13 taking the share in the total investment from 76.50 percent in 2007-08 to 92.23 per cent in 2012-13. (Page 4 of the CAG Report)
2. During XI Five Year Plan (2007-12), the State of Tamil Nadu planned capacity addition of 7,808 MW to meet the deficit of power. This included 3,270 MW of capacity addition by TANGEDCO of which 2,500 MW of power was proposed to be from four thermal power projects. While the two thermal projects at North Chennai Thermal Power Station Stage –II (2*660 MW) (NCTPP) and Mettur Thermal Power Station Stage –III (1*660 MW) (MTPP) have already suffered time overrun of 24 to 31 months, the balance projects were either not taken up or abandoned midway. Consequently, the actual capacity addition of TANGEDCO by the end of March 2012 was only 112 MW which were from hydel and gas based power stations and increased to 712 MW due to completion of MTPP in October 2013. (Page 17 of the CAG Report)
3. TANGEDCO did not pass on the additional interest burden of Rs 58.68 crore to BHEL as per the contractual terms. (Page 17 of the CAG Report)
4. TANGEDCO could not avail interest rebate of Rs 36.14 crore from Power Finance Corporation / Rural Electrification Corporation due to delay in completion of these projects. (Page 17 of the CAG Report)
5. Award of contract for Unit –I of NCTPP to BHEL under Engineering, Procurement, Construction-cum-Finance basis by TANGEDCO deviated from the guidelines of National Electricity Plan (NEP), 2007 which did not allow arrangement of financing packages from the manufacturers/suppliers as it could reduce competition among the bidders. (Page 17 of the CAG Report)
6. TANGEDCO could not avail the benefits of Mega Power Projects due to award of NCTPP Unit – II on nomination basis instead of under International Competitive Bidding (ICB) route as required. (Page 17 of the CAG Report)
7. Despite delays in project execution, TANGEDCO did not fix the responsibility for the delays at its end or on the EPC con- tractors. (Page 18 of the CAG Report)
8. Due to delay in completion of thermal projects with a capacity of 1,800 MW, the state was deprived of TANGEDCO’s own generation to the extent of 22,557 Million Units. This resulted in purchase of power from other costlier sources. (Page 18 of the CAG Report)
9. As per the contractual terms of MTPP, maximum LD of 10 per cent of the contract price and penalty at Rs. 107 crore per month of delay was to be levied. In respect of NCTPP, the penalty was to be at the rate 0.5 per cent for each week of delay and from 40 to 43 month at 0.75% percent, during 44 and 45 months at one percent and beyond 45 months without any ceiling provided these delays were attributable to attributable to the EPC Contractors. However, TANGEDCO allowed several Extensions of Time (EOT) for both the projects without fixing responsibility for the delays either on itself or on the EPC Contractor and without deciding the impact of such EOTs on time and cost overruns of the project. While BHEL and their private subcontractors was allowed blanket EOT without any time limit, BGR was given the latest EOT upto December 2013. Though an amount of Rs 7418.07 crore was leviable as LD and penalty as per the contractual provisions till September 2013 in respect of MTPP and upto December 2013 in respect of NCTPP (as indicated in Annexure- 14), TANGEDCO had already released 82 per cent of the total amount due to the contractors and the balance amount retained was only Rs 2,188.67 crore (September 2013). Under the circumstances, recovery of LD/Penalty as per the contractual terms as and when decided is uncertain. (Page 36 of the CAG Report)
10. The Government replied (December 2013) that the extensions of time were given without prejudice to the levy of penalty. The fact, however, remained that TANGEDCO was yet (December 2013) to initiate any action for levy of LD even after noticing delay of more than two years in respect of NCTPP project and after commissioning of MTPP in October 2013. (Page 36 of the CAG Report).

The observations by Comptroller and Auditor General of India, a Constitutional body, endowed with the responsibility and the duty of auditing the performance, particularly in the context of contractual management of TANGEDCO are scathing and highly critical especially related to the delay. These are the reasons detailed by the CAG on aspects of delay of Unit I and Unit II of NCTPP as per Annexure 12 of CAG report:

1. Boiler Erection Commencement in Unit I of NCTPP – Delayed by 5 months due to commitment of BHEL and sub-vendors for other projects resulting in delayed delivery of supply and non- availability of skilled labour.
2. Boiler Drum Lifting in Unit I of NCTPP – Delayed by 9 months due to commitment of BHEL and sub-vendors for other projects resulting in delayed delivery of supply and non-avail- ability of skilled labour.
3. Generator Stator in Unit I of NCTPP – Delayed by 32 months due to commitment of BHEL for other projects, manufacturing process for equipment was delayed.
4. Turbine Bearing Gear in Unit I of NCTPP – Delayed by 30 Months due to commitment of BHEL for other projects, manufacturing process for equipment was delayed.
5. Boiler Light up in Unit I of NCTPP – Delayed by 24 Months due to commitment of BHEL for other projects, manufacturing process for equipment was delayed.
6. Coal Handling plant in Unit I of NCTPP – Pending as of De- cember 2013 – due to delay in execution of this work by the sub-contractors of BHEL
7. Fire Protection System in Unit 1 of NCTPP – Pending as of December 2013 – due to inadequate manpower provisioning by BHEL.
8. Generator Stator in Unit II of NCTPP – Delayed by 14 months due to delay by BHEL in manufacture, despatch and erection of Generator Stator.
9. Turbine Bearing Gear in Unit II of NCTPP – Delayed by 16 months due to delay by BHEL in manufacture, despatch and erection of Turbine Bearing Gear.
10. Boiler Light up in Unit II of NCTPP – Delayed by 11 months due to delay by BHEL in manufacture, despatch and erection of Boiler.
11. Coal Handling Plant in Unit II of NCTPP – Still pending as of December 2013, due to inordinate delay in execution of this work by the sub-contractors of BHEL
12. Fire Protection System in Unit II of NCTPP – Still pending as of December 2013 and delayed due to inadequate manpower provisioning by BHEL.

Other irregularities cited by the CAG include delaying projects inordinately right from the word go. For example the Ennore Expansion saw the light of the day after over 2.5 years of the tendering process,

Ennore STPP 2*660MWe has been caught in litigation, with judgment reserved by the Madras High Court, because of alleged irregularities committed by TANGEDCO in evaluating the bids and awarding the contract to BHEL and their sub-contractors after more than 2 years of dithering.

So also still no word on the the price bids for the long delayed 2660 MWe Udangudi project, originally planned in 2007 and which were opened in October 18, 2014 when Gnanadesikan was the Chairman of TANGEDCO.

Soon after Gnanadesikan became the Chairman in September 2012, tariff was hiked by over 37%. It is only during his tenure that the TANGEDCO chose to buy private power at very high rates even when low cost wind energy was available.

Not only the CAG, the Tamil Nadu Electricity Regulatory Commission (TNERC) has also been scathing about how TANGEDCO has failed to address the issue of delayed plants and yet it wants to keep buying costlier power. Consider the order passed by TNERC below which lends lot of credence to the allegations made in the recent PIL.

TNERC ORDER

The Tamil Nadu Electricity Regulatory Commission (TNERC) has in its order dated 15-09-2014 in M.P.Nos. 9,10, 13,14,16,28,53,72 and 81 of 2013 and M.P.Nos.9 & 18 of 2014 rejected the plea of TANGEDCO to regularize its high cost power purchase from private power players owing to the delay in commissioning of thermal plants by the contractors.

TNERC in its order has said,

5.5. With regard to Item No.5, the Petitioner (TANGEDCO) submitted that the progress of new power plants and joint venture plants of TANGEDCO are as follows:-

5.6       With regard to Items No.6 and 7, the Petitioner (TANGEDCO) submitted that in the contract document pertaining to MTPP–Stage III, there is a provision for liquidated damages (LD) with a ceiling of 10%. In addition to the above LD, there is a penalty clause to levy penalty of Rs.107 crores per month for the delay. This penalty clause is addressing the issue of loss of generation. In the case of NCTPP-Stage-II, the LD clause is replaced and in its place a penalty clause is provided. This takes care of LD aspect and penalty aspect for loss of generation. There will be no ceiling on the maximum penalty. In respect of Vallur Thermal Power Project, the same being a joint venture project, orders have been placed by NTECL and not by TANGEDCO. The Petitioner further submitted that the issue of LD / Penalty will be dealt with at the time of closure of contracts.

6.2. Hence, it can be seen that for the second and third queries, the response of the TANGEDCO is reasonable. However, in respect of the last query regarding recovering of this high cost of power, the response of the TANGEDCO is not justified. During the hearings, on 13-12-2012 on the same issue in earlier year, TANGEDCO was directed to identify whether this high cost of power can be sold tosome of the takers like industrial consumers at landed cost so that it would be revenue neutral to TANGEDCO. After carrying out the due process, TANGEDCO had clarified by way of an affidavit dated 22-01-2013 that it was not possible for them to supply this power as reliability power to consumers. TANGEDCO has purchased 2477 MU from these four IPPs at the weighted average variable cost of Rs.11.20 / kwhr. This works out to a total expenditure of Rs.2774 crores. The average rate of realization of TANGEDCO by sale of power is Rs.4.89 / kwhr. as per the retail tariff order dated 20-06-2013. Thus, the excess cost of power purchased is not approved for the purpose of ARR.

NOT ACCOUNTABLE

IAS officers in particular get away scot-free from scams, and this is a classic case of one officer who has had the longest stint in the Board of TANGEDCO, not being held accountable at all for the mess TANGEDCO finds itself in.

Instead he has been promoted as the Chief Secretary!

The Board of TANGEDCO steers the power sector for the State, and the vision of the Board is articulated through its actions. In other words, if the Board of TANGEDCO had functioned well, the State wouldn’t have experienced power cuts at any point in time and TANGEDCO wouldn’t have experienced this unprecedented loss eating into the State treasury, literally sucking away all the financial resources of the State. And the colossal inefficiency of this Board is passed on to the consumer public at large through frequent tariff rise.

Only one officer has had the distinction of serving in the Board of TANGEDCO for nearly 11 years since 2001 till date, during which time TANGEDCO has actually been pushed to the brink, what with an accumulated loss of over Rs 1 lakh crore during this period.

1. Gnanadesikan became Chairman of TANGEDCO on 01.05.2001 and held on to that position till December 2014, after which he was rewarded with the Chief Secretary’s post.

It is unthinkable anywhere in the world, whether in the government or in the private sector, that such gross inefficiency should be rewarded with elevation to such a key position. And the people are penalized.

It may also be interesting to note that Gnanadesikan also serves as the Vigilance Commissioner, and hence no state agency can conduct an investigation into the affairs of TANGEDCO in an impartial manner.

The demand for a CBI probe gets added support by the fact that TANGEDCO has allegedly misused and misappropriated Government of India schemes and funds taken under various heads. Any misuse or misappropriation of GoI funds, CBI can step in since the Nation wants to know how a State owned utility sector namely TANGEDCO utilised funds taken under various schemes and heads from GoI. Most of these decisions were taken when Gnanadesikan was the Board Member either as its Chairman or Finance Member in the capacity of State Finance Secretary. Hence, CBI alone can be the most competent authority to investigate this. Even if one rupee of GoI fund is misused or misappropriated, CBI can step in. It is imperative that CBI investigates this since 2001 to uncover misuse or misappropriation of GoI funds and the role played by Gnanadesikan.

Only a comprehensive court-monitored investigation can help in nailing the culprits. Now all eyes on the First Bench of the High Court of Madras whether it would save the State from further loot from the biggest bandicoots – Gnanadesikan and Sheela Balakrishnan.