Chhattisgarh State Electricity Regulatory Commission 2 of 77 2. Brief History of project: 2.1 The...
Transcript of Chhattisgarh State Electricity Regulatory Commission 2 of 77 2. Brief History of project: 2.1 The...
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Petition No. 08 of 2015(M)
In the matter of, approval of revised capital cost for the 1x500
MW Korba West TPP.
Chhattisgarh State Power generation
Company Limited … Petitioner
PRESENT : Narayan Singh, Chairman
Vinod Shrivastava, Member
ORDER
(Passed on 22/09/2015)
Chhattisgarh State Power Generation Company Limited (CSPGCL
in short) herein after referred as petitioner, has filed this petition under
section 62 and 86 1 (a) and (b) of the Electricity Act 2003, and
Chhattisgarh State Electricity Regulatory Commission (Terms and
Conditions for determination of tariff according to Multi-Year Tariff
principles and Methodology and Procedure for determination of
Expected revenue from Tariff and Charges) Regulations, 2012 (in short
CSERC MYT Regulation, 2012) before the Commission for approval of
revised capital cost for the 1x500 MW Korba West Thermal Power Plant
(TPP). As per provision of Act and Regulation notified there under,
suggestions, comments and objections were invited on the petition and
hearing was also conducted.
Chhattisgarh State Electricity Regulatory Commission Irrigation Colony, Shanti Nagar, Raipur - 492 001 (C.G.)
Ph.0771-4048788, Fax: 4073553
www.cserc.gov.in, e-mail: [email protected]
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2. Brief History of project:
2.1 The Chhattisgarh State Power Generation Company Limited
(CSPGCL), became functional as generation company w.e.f., 1st
January 2009, carved out on re-organization of The Chhattisgarh
State Electricity Board (CSEB). CSPGCL is a Company registered
under the Companies Act, 1956.
2.2 The petitioner submitted that HTPS Korba West plant has four
units of 210 MW each. The plant was commissioned in the period
1982-1986. The erstwhile CSEB in the year 2008 decided for
establishment of a new unit of 500 MW in the same premises.
Though there are no common auxiliaries and the project has also
included acquisition of some land, erection of new quarters and
so many other facilities; yet due to proximity of the site and
initial administrative / technical support, the project is called as
Korba West TPP.
2.3 The petitioner further submitted that after COD of this plant
CSPGCL has diversified generation capacity of 2,424.7 MW in its
power portfolio comprising of Thermal, Hydro, Small Hydro and
Co-generation power plants.
2.4 The petitioner submitted that I X 500 MW Korba West Thermal
Power Project (Korba West TPP) is installed to meet the growing
demand of power in the State of Chhattisgarh. The Petitioner has
further confirmed that 100% power that will be generated from
this Unit will be sold to CSPDCL on the rates to be determined by
the Commission. With CSPDCL’s consent for purchase of 100%
power from these Units, MOU was also signed on 15.10.2009.
Subsequently, a Power Purchase Agreement to this effect was
signed on 30.11.2011.
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3. Facts of the petition:
3.1 The petitioner submitted that the CSERC (Terms & conditions of
determination of tariff according to Multi-Year tariff principles)
Regulations, 2010 (in short “CSERC MYT Regulation, 2010”) had
a specific clause regarding approval of the business plan.
Accordingly, in February 2010, CSPGCL filed a business plan
petition no. 08 of 2010 (M) before the Commission. Among other
schemes, the detail proposal for capital cost approval, amounting
to Rs 3,156.00 crore (exclusive of PVC and initial spares), of
Korba West 1X500 MW TPP project was also submitted before the
Commission. Copies of the orders for BTG and BOP along with
PFC loan agreement and all other related documents were
submitted before the Commission. Vide its order dated 1st June
2010, the Commission has considered the same.
3.2 CSPGCL submitted that in Capital Investment Plan petition no. 52
of 2012 (M) filed by CSPGCL under the provisions of the CSERC
(Terms & conditions of determination of tariff according to Multi-
Year tariff principles) Regulations 2012 (in short “CSERC MYT
Regulations 2012”), leave was craved for filing of revised project
cost at the time of tariff filing. During the TVS, the same was
consented by the Commission. In the CIP order also, the same
has found place. The unit was synchronized on 18th March 2013
and the Commercial Operation Date (COD) was attained on 5th
September 2013. During construction, erection and
commissioning, the price indices moved significantly. The
inflationary trend resulted in increased hard cost due to
significant PVC and also resulted in higher IDC due to increased
interest rates. The petitioner submitted that the impacts of these
variations are uncontrollable.
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3.3 CSPGCL while considering the provisions made in the Act, the
relevant Regulations, directions of Hon’ble APTEL and as well as
this Commission, has filed a petition on 14th March 2014 for
approval of the revised Capital cost and Tariff for the balance
control period i.e. FY 2014-15 and FY2015-16. Petition was not
registered by the Commission and vide letter dated 19th May,
2014 petitioner has communicated that the Commission has
decided to continue the single part tariff of Rs 2.65 per unit (used
for estimation of power purchase cost of CSPDCL) for FY 2014-
15. Commission also directed CSPGCL to file separate petitions
for approval of revised capital cost and ARR. Meanwhile, vide
letter no. 03/CSERC/Tariff/500 dated 7 April 2014, CSPGCL was
also directed that while filing petition for approval of revised
capital cost, component wise comparison of originally approved
cost vis-à-vis actual cost along with detail of penalty clause and
penalty imposed shall be submitted.
3.4 CSPGCL submitted that the instant petition, for approval of the
revised capital cost of the project, is being filed accordingly.
3.5 CSPGCL in this petition has prayed:
i) To the revised estimated capital cost of Rs 3,696.18 crore
(excluding cost of initial spares) with leave for
submission of final Capital cost after finalization of
audited accounts of financial year FY 2015-16 i.e. after the
‘cut-off date’ applicable for the project.
ii) Allow procurement of initial spares to the tune of 2.5% of
the project cost.
iii) Condone any inadvertent omissions / errors / shortcomings
and permit CSPGCL to add / change / modify / alter this
filing and make further submissions as may be required at
a future date.
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iv) Allow recovery of petition filing fee and publication
expenses and allow any such relief, as the Commission may
deem fit and proper keeping in view the facts and
circumstances of the case.
4. Proceedings in petition:
4.1 A set of data gaps were forwarded to CSPGCL vide letter no. 2057
dated 27/12/2014. After preliminary scrutiny and due verification
of the document on record the Commission registered the petition
as petition no. 08 of 2015 (M) dated 05/02/2015.
4.2 Further, the Commission raised additional data gaps to ensure
adequacy of information for processing the petition vide letter no.
267 dated 06/02/2015.
4.3 The Technical Validation Session (TVS) was held on 04/04/2015.
During TVS, the Petitioner presented the case in detail focusing
on salient features of the Petition. The Petitioner also highlighted
issues such as increase in Capital Cost of the Unit as compared to
original estimated cost, delays in implementation, reasons for
delay, and measures taken by CSPGCL to minimize the increase
in Project Cost due to time overruns.
4.4 During TVS, CSPGCL was asked to submit comparison of Capital
Cost with Mauda projects of 500 MW Unit size vis-à-vis with
benchmarking of Capital Cost (Hard Cost) for Thermal Power
Stations with Coal as main fuel notified by CERC vide its Order
dated 4 June, 2012.
4.5 CSPGCL submitted the replies to data gaps raised by the
Commission and also made addition submission in support of
various contentions vide its letters dated 09/01/2015,
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13/02/2015, 08/04/2015, 17/04/2015, 29/04/2015 and
18/05/2015.
4.6 In accordance with provisions of CSERC, MYT Regulation, 2012,
the Commission vide its letter no. 292 dated 09/02/2015 has
directed CSPGCL to publish its Petition in news papers in abridged
form to give due opportunity to all the stakeholders to offer
views/suggestions/objections. The petitioner vide its letter no.
124 dated 10/02/2015 submitted gist for approval for publication
in news papers. The gist was approved and communicated vide
letter no. 366 dated 24/02/2015 for publication in news papers.
The petitioner vide their letter no. 199 dated 09/03/2015
confirmed that the gist was published in following news paper on
27/02/2015:
Dainik Bhaskar (Hindi) - Bilaspur
Hari Bhoomi (Hindi) - Raipur
Hitvada (English) - Raipur
4.7 The public notice for hearing was published by the Commission in
the following newspapers for inviting suggestions/objections from
the stakeholders.
Table: Newspaper Notice of Hearing
Name of the Newspaper Date of Publication
Nav Bharat (All Edition of CG)
25/03/2015 Dainik Bhaskar (All Edition of CG)
Hitvada (All Edition of CG)
4.8 The copies of CSPGCL’s Petition and its Executive Summary were
made available at CSPGCL’s and also on the Commission’s
website.
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4.9 The Commission received objections / suggestions / comments
from stakeholders in writing on the Petition filed by CSPGCL for
determination of Capital Cost.
4.10 The hearing in the matter was held on 31/03/2015 at 03:30 pm
at the Commission’s Office. The list of individuals who
participated in the hearing is shown in Appendix – I.
4.11 The issue raised by different stakeholder along with petitioner’s
response and Commission’s views are elaborated in subsequent
section of this order.
4.12 CSPGCL submitted that the AG audit up to 2013-14 has
completed. A certificate issued by Chartered Accountant dated
14/10/2014 was submitted along with petition to confirm a
capital cost of Rs. 2,935.96 crore was capitalised in its books of
account as on the date of COD and as on 31st March 2014 the
capitalization was Rs. 3,073.53 crore.
4.13 CSPGCL further submitted certificate issued by Chartered
Accountant dated 16/05/2015 confirming additional capitalization
of Rs. 310.70 crore for FY 2014-15. Thus total value of
capitalization till 31/03/2015 towards Korba West TPP is Rs.
3,384.23 crore as per petitioner books of account.
4.14 The Commission has ensured that due process as contemplated
under the law be followed at every stage meticulously and
adequate opportunity was given to all the persons concerned to
file their objections / suggestions / comments in the matter.
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5. Hearing Process, including the Comments made by various
Stakeholder, The Petitioner response and views of
Commission:
5.1 Delay in the implementation of the project:
5.1.1 Shri Satyanarayan Sharmaji (MLA) along with Shri Shyam Kabra
(Urla Industries Association), Gopal Krishna Agrawal (Laghu
Udyog Bharati), Shri Rajkumar Gupta of (Chhattisgarh Nagrik
Adhikar Raksha Manch) & Shri Sudhendu Gupta (Chhattisgarh
Harihar Pehredar Samiti) during hearing pointed out that
construction of the project has already been delayed by 15
months, hence, responsibility should be fixed and the delayed
cost should not be burdened on the consumer directly. It was
stated that plant should be got completed within 44 months as
per the guidelines of CERC, however, CSGPCL has taken more
than 56 months. He further stated that due to prolong delay
the cost due to IDC and impact of PVC will increase and is not in
the interest of State and consumers. It was also alleged that
general people of Chhattisgarh are not responsible for non
completion of project in scheduled time; on the contrary
CSPGCL is fully responsible for this. Besides this, they also
states that if the project been got completed within the time
schedule State could be able to achieve surplus of additional
500 MW, owing to this power cut problem should not have been
arise. As also, the distribution company should not have been
purchased the power at high cost rather it can directly procure
the power from generating company in a reasonable cost.
Additionally, it was also alleged due to delay in getting the
project completion is mainly because of mis-management and
finally pointed out on the working of officers particularly
engaged on this project. That in the year 2010 when CSPGCL
has got approval of capital cost from the Commission, then it is
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the responsibility of the Commission for proper persuasion and
asking feedback to get the project complete in time. Thus,
Commission is also responsible for not getting the completion of
project in a time bound manner.
CSPGCL Reply:
5.1.2 In reply to above CSPGCL submitted that towards reasons for
delay in execution of the project explaining that in and around
the country there were lot of project which got delayed from 15
to 40 months. Regarding Korba West TPP project primarily it
was estimated that in the year June 2012 commissioning could
be achieved whereas actual date of commissioning is achieved
in March 2013, thus there is a delay of only 9 months. The
CERC has stated 44 months span for eligibility of additional
0.5% ROE. However such incentive scheme does not exist in
CSERC Regulations. The justification for actual time incurred for
synchronization / COD of the plant has been explained in the
TVS. This delay was also beyond the control of CSPGCL. During
the erection / construction, a severe accident took place at
nearby power house (BALCO). The Chimney construction of M/s
Balco was being done by M/s GDCL. The same agency was also
selected by M/s BHEL through tender for Chimney construction
of Korba West project. Exercising prudence, M/s BHEL was
directed to select other suitable agency for construction of
chimney prudently. The whole process resulted in additional
time requirement. Additionally, the agitation by land oustees at
the ash bund site also resulted in work interruptions,
necessitating additional time. Both the factors were
uncontrollable for CSPGCL. CSPGCL in its reply further clarified
that the PV clause is a standard clause in such long gestation
projects. As submitted in the para 5 of the petition, the clause
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was part of the order copies submitted during the Business plan
proceedings (no 08/ 2010) in which principle approval was
accorded by the Commission. In the year Feb’2013 when
chimney was found to be properly functions subsequently the
unit got commissioned in March’2013. In spite of such situation
CSPGCL is able to achieve the target as early as possibility
which does not point on the delay in project. CSPGCL also
pointed that for construction of project there is no burden on
the general people of Chhattisgarh. In the real scenario, the
generation cost per unit is very less as compared to other
project. In the year 2015-16 the CSPGCL has filed petition
before the Commission vide petition no. 01/2015 which clearly
indicates that NTPC Mauda Project cost worked out to Rs. 5.65
per unit. They also cited the examples that power purchase cost
from Kahalgaon power house, NTPC and Joint venture of SAIL
BSP at Rs. 4.54 per unit and Rs. 4.61 per unit respectively,
whereas in the revised cost submitted by CSPGCL it arrives at
Rs. 3.14 per unit, which is much lesser than other project.
Petitioner replied that the Unit is commissioned in March 2013
and not in September 2013 as stated by the objector. Further,
as submitted in the petition, at the time of earlier estimation
IDC was estimated notionally, while the IDC stated in the
instant petition is realistic and based on actual audited
accounts. The allegation of negligence is unfounded, baseless
and as such is strongly denied.
Commission’s view:
5.1.3 Commission has judiciously examined the petition along with
additional submission made with document available on records
and after due prudence check the petition is being disposed.
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5.2 Capital Cost:
5.2.1 Shri Satyanarayan Sharmaji (MLA) along with other objectors
has proposed that capital cost to the tune of Rs. 3,696 crore
which is very high, whereas, similar project constructed by
NTPC for Mauda Project which constitute capital cost less than
Rs. 3000 crore (for one unit with capacity 500 MW). Hence
there is a prima facie mistake worked out to Rs. 700 crore. It is
further proposed that the submission made by the applicant for
project cost does not match with each other which require to be
investigated. Further it is objected on the issue of high total
capital cost of the project which is increased by 17.1% i.e. Rs.
3,696.18 crore instead of Rs. 3,156.31 crore under business
plan. The objector has also raised the issue that break up of
project cost was not mentioned in the petition because of which,
comparison could not be made with similar project like NTPC
Mauda. As also, objector has commented that the applicant has
not provided anywhere in the petition on which date project cost
arrived at Rs. 3,696.18 crore accordingly he pointed out that it
is simply a statistical jugglery to increase the project cost. One
of the objectors was further stated that towards construction of
Korba West (Ext) project the equity was infused by Govt. of
Chhattisgarh hence directly or indirectly the hike in the project
cost will be burdened on the end consumers. They pointed out
the approved capital cost of the project in the year 2010 was
Rs. 3156 crore which constitute Rs. 6.51 crore per MW, which
has now been substantially increased by 25%. It was also
alleged that considering bench mark cost is of Rs. 5 crore per
MW, the project cost would not be more than Rs. 2500 crore. It
is further pointed out on the issue that Korba West (Ext) is
contemplated to be installed in the Green Field. Since applicant
is already holding the land and coal holding machinery along
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with other infrastructure facility, accordingly, the instant project
cost should not be more than Rs. 4 crore per MW. Hence,
contended that revised capital cost of the project should not be
approved by the Commission. It is also states that on the
request of the applicant if Commission approves the revised
capital cost then end consumer will be directly burdened. It is
further states that Commission has approved more than 60% of
the cost beyond bench mark cost for construction of project in
the arena of Green Field.
CSPGCL Reply:
5.2.2 In Reply to the above point CSPGCL submitted that approval for
NTPC Mauda project was filed before Central Electricity
Regulatory Authority on August 2014. According to Central
Electricity Regulatory Authority cutoff date capital cost was Rs.
6696.53 crore was estimated. However, when initial spares of
2.5% was separated then capital cost was Rs. 6533.20 crore. As
aware, the bench mark cost for the 1st unit decided by the
Central Electricity Authority for 2x500 MW is around 54% and
for 2nd unit it costs 46%. The project cost of 1st unit of Mauda
project is Rs. 3528 crore, whereas, till cut-off date the project
cost of Korba West (Ext) is Rs. 3696 core is estimated.
Accordingly, there is a difference of Rs. 168 crore, out of this,
difference of approx. Rs. 101 crore was due to taxes because of
the fact that there is no tax exemption scope for Korba West
(Ext) capacity of 500 MW provided to Govt. of Chhattisgarh.
Another issue is that in the Mauda project debt equity ratio is
70:30, whereas, for Korba West (Ext) the debt equity ratio is
90:10. Due to change in the capital structure the project cost
seems to be on higher side. It is also pertinent to state that the
instant project cost also include distance coal conveyer system,
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which leads to the reduction of transportation cost of coal from
one place to another. CSPGCL also pointed that for construction
of project there is no burden on the general people of
Chhattisgarh. In the real scenario, the generation cost per unit
is very less as compared to other project. In the year 2015-16
the CSPGCL has filed petition before the Commission vide
petition no. 01/2015 which clearly indicates that NTPC Mauda
Project cost worked out to Rs. 5.65 per unit. They also cited the
examples that power purchase cost from Kahalgaon power
house, NTPC and Joint venture of SAIL BSP at Rs. 4.54 per unit
and Rs. 4.61 per unit respectively, whereas in the revised cost
submitted by CSPGCL it arrives at Rs. 3.14 per unit, which is
much lesser than other project.
The objection raised towards approved capital cost of Rs. 3156
crore which is 25% more than the benchmark cost is
unwarranted. It is also not appropriate to state that other
generator of power project including NTPC who intends to
develop power project in the field of Green field in which per
M.W. cost comes to Rs. 5 crore. None of the similar project so
far not developed at the cost of Rs. 5 crore per MW. As
submission made in the petition that for Korba West (Ext) plant
other infrastructure factors like coal handling plant, water
treatment plant and switchyard have been constructed
separately. Previous plant has already completed its 25 years as
such the infrastructure build at that time is no longer use for
this project. The objector has raised an issue regarding
maximum cost per MW comes to Rs. 4 crore is very
inappropriate. None of the similar project, so far not developed
at the cost of Rs. 4 crore per MW. As aware, in the state of
Chhattisgarh CSPGCL is only the generating company who can
achieve the cost per unit very less. If the approval could not be
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granted on the actual cost then critical situation will arise for
proper functioning. As narrated that CSPDCL use to purchase
the power at very high cost, which not only resulted in high
power purchase cost but also cumbersome situation will arise
for non availability of power. The revised cost as mentioned in
the petition is based on the actual cost. Electricity Act, 2003
also provides that cost of power is always constitute on actual
costing. Thus the apprehension of costlier power is just a rumor,
which is well narrated in the above para. Here, it is also
pertinent to mention that worked out cost by CSPGCL is less
than bench mark cost decided by the Central Electricity
Authority for the new power project which is a significant
achievement.
The objector has already raised the issue on installation of
this project availability of the power in the state will increase, so
that CSPDCL could not procure power from the private
generator. The explanation is well narrated in elsewhere in the
order. CSPGCL submitted that towards reasons for delay in
execution of the project explaining that in and around the
country there are lots of project which got delayed from 12 -15
months to 50 months. Regarding Korba West (Ext) project
primarily it was estimated that in the year June 2012
commissioning could be achieved whereas actual date of
commissioning is achieved in March 2013, thus there is a delay
of only 9 months. This delay was also beyond the control of
CSPGCL.
Regarding mismanagement and in adequate appropriation
of fund it is to state that the allegation of negligence is
unfounded, baseless and as such, are strongly denied as opined
by CSPGCL.
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CSPGCL further in its reply denied that the capital cost is on
higher side. In fact, the expected tariff from this plant is much
lesser than many other new plants. It is even lesser than the
projected tariff from NTPC (Seepat – Phase I) which is a super
critical Mega project. It is denied that the component wise
project cost has not been submitted. On the contrary, even the
order copies of all the major orders have been submitted.
Annexure-I, read with para 7 of the petition, makes it amply
clear that the project cost of 3696.18 Cr is estimated for cutoff
date of 31st March 2016. It is denied that the actual capital
cost has not been provided. The CA certificate clearly states:
“We hereby certify that as per information, records,
explanation and audited financial statements of
Chhattisgarh State Generation Co. Limited for the year
ended on 31.03.2014 provided to us the amount of Gross
Block of Fixed Assets as on C.O.D. i.e. 05.09.2013 is RS
2935.96 Cr and as on 31.03.2014 Rs 3073.53 Cr pertaining
to New 1x500 mw Korba West Thermal Power Project,
Korba.”
Clearly the certification is based on audited accounts and
other all relevant documents. The audit report of CSPGCL for FY
13-14 is already with the Hon’ble Commission.
It appears that the objector has failed to correlate the data
appropriately. The annexure-I of petition provides the
component wise break up of project cost of Rs 3696.18 Crore.
Para 7.3 clearly quotes Regulation 18.3 of CSERC MYT
Regulation 2012 as per which for coal based thermal stations,
initial spares to the tune of 2.5% of project cost are allowed.
Para 7.4 deals with capitalization, including year-wise additional
capitalization. The table provides additional capitalization of the
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project cost as well as the Initial spares. It also provides the
total additional capitalization. From the above, it’s clear that:
Project Cost as per Annexure I : Rs 3696.18 Cr
Capitalization of Project Cost as per para 7.4
Capitalization upto 31st March 2014 : Rs 3073.53 Cr
Additional Capitalization in 14-15 : Rs 253.03 Cr.
Additional Capitalization in 15-16 : Rs 369.62 Cr.
Total Expected Project Cost : Rs 3696.18 Cr
Thus, there is no mismatch in the project cost. Further,
regarding Initial Spares, it may be seen that Initial Spares as
per para 7.3 (Regulation 18.3) – 2.5% of project cost i.e. Rs
92.40 Cr.
Capitalization of Initial Spares as per para 7.4
Expected Additional Capitalization in 14-15 : Rs 46.20 Cr.
Expected Additional Capitalization in 15-16 : Rs 46.20 Cr.
Total Initial Spares : Rs 92.40 Cr.
Again, it may be appreciated that there is no mismatch.
The figures quoted by the objector regarding capital cost of
Mauda project has lost its relevance in light of the tariff petition
filed by NTPC Mauda in August 2014. CSPGCL reiterate that cost
of Korba West TPP includes cost of separate systems for all the
inputs/ output such as Coal Transportation system, Water
Treatment Plant, Ash Handling Plant, Switchyard etc. The
existing plant has already completed its useful life and none of
the old plant systems is proposed to be used in the project on
permanent basis. As such, for cost comparisons, the project
cannot be considered as extension project. Regarding, land cost
at Mauda, it may be suffice to note that objector has
conveniently ignored that the Korba West 500 MW project
includes cost of LDCC, which is not applicable in Mauda project.
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Commission’s view:-
5.2.3 The above issue is being dealt and deliberated in subsequent
para of this order.
5.3 Status of Benefits under Mega Power Policy
5.3.1 The objector has particularly raised objection on the status of
benefits under modified mega power policy in order to reduce
the capital cost. Any failure on the part of the applicant in
availing benefits under Central Government scheme should not
be burdened on consumers by way of higher retail tariffs.
CSPGCL Reply
5.1.1 As per Provisions of Mega Power Policy, the benefits were not
available for Korba West Project. Being a government policy, the
matter is uncontrollable for CSPGCL.
Commission’s view
5.3.2 Commission agress with CSGPCL’s reply, however, CSPGCL is
directed to explore the possibility of availing tax benefit if any
for new project under the Income Tax Act, 1961.
5.4 High Cost of debts & Interest During Construction
5.4.1 Shri Shyam Kabra along with other objectors also raised issue
on the high debt cost. He pointed out that CSPGCL should
explore the possibility of restructuring existing debt as the
project having high debt to equity ratio, because of the reasons
in the cost of debt will result in significant cost savings. Further,
he also informed that the rate of interest on loans has increased
from 11% originally to 11.5% - 13%, but has not provided any
details about lending institutions and subsequent rate of
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interest. He also alleged that NTPC Mauda has claimed a
weighted average rate of interest as low as 8.12% during FY
2013-14 therefore it is quite clear that CSPGCL has not made
any efforts to reduce cost of debt. Also pointed out that
weighted average rate of interest cannot be ascertained in
absence of relevant authentic data. Mere one line statement
cannot suffice the question in this regard. While approving
Business Plan Hon’ble Commission allowed IDC of Rs. 397 crore
with a proposed capital cost of Rs. 3196/- crore which is only
about 12.6% of capital cost. He also contended that CSPGCL
obtained certificate from Chartered Accountant which states that
Interest during Construction as Rs. 705.68 crore out of total
capital cost of Rs. 2935.96 crore which is as high as about 24%
of project cost. Such a huge IDC is not digestible. Alternatively,
NTPC Mauda has claimed IDC of Rs. 414.46 crore against
Audited Actual Cost of Rs. 2867.67 crore for Unit-I of 500 MW
till COD which is only about 14.45% of the capital cost. While
approving Business Plan, Commission directed CSPGCL to
properly schedule the dispatches of equipments and materials
required for the installation of the projects in order to minimize
interest during construction and also directed CSPGCL to take
appropriate action to minimize the amount of IDC. But in the
present petition, the Applicant has ignored to provide any
information on its efforts in complying with the directive of
Hon’ble Commission which is highly regretted.
CSPGCL reply
5.4.2 The complete loan for the project has been drawn from Power
Finance Corporation which is a ‘Navratna’ undertaking of
Government of India. To explore the possibility of loan
switchover a qualified merchant banker was appointed and as
per expert opinion, after incurring complete CAPEX & full loan
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disbursement on the project, refinancing may be taken up. It is
denied that the loan details and applicable interest rates have
not been submitted to the Commission. It is also denied that
the dispatches have not been scheduled as per standard
industrial practice. The IDC stated in the petition is the actual
IDC as per audited accounts. It is further submitted that
though with higher debt the IDC is higher, however at the same
time higher debt results in lower ROE and ultimately the end
consumer is benefitted. The anticipated rate of cost of power
purchase in FY 15-16 from Mauda project is Rs 5.65 per unit
while for Korba west TPP the same is expected to be Rs 3.14 per
unit.
Commission’s view
5.4.3 Commission had approved l for financing of this project at
debt:equity ratio of 90:10 vide its order dated 01/06/2010. The
impact on project cost due to higher debt of this project has
been analyzed in detail in subsequent para of this order.
5.5 High Cost of Trial run, Initial Spares & BTG Erection
5.5.1 Shri Shyam Kabra also contended on the issue of high cost of
trial run, initial spares & BTG Erection. The objector has
submitted that the working capital margin was tentatively
estimated at Rs. 35 crore. He further stated that with the rise in
coal and oil cost, the actual net working capital margin incurred
was Rs. 68.63 cr (i.e. net of fuel cost and sale of infirm power
Rs. 16.22 crore). He further raised questions on the issue of
initial spares to the tune of 2.5% of project cost should have
been allowed instead CSPGCL envisaged 50% of the initial
spares may be capitalized by 31st March 2015 and the balance
are expected to be capitalized in FY 2015-16. Further to above,
he also pointed out on the issue of PVC in which he states that
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PVC clause do not contain rate ceiling in terms of percentage
rather it has time ceiling in terms of schedule completion and
finally contended on the issue of completion of BTG is subjected
to maximum ceiling of 15% whereas application has raised the
cost upto 35%?
CSPGCL Reply
5.5.2 The objector has wrongly computed the cost of generation of
infirm power. The rate of infirm power is Rs 1 per unit and not
Rs 2.65 per unit. Accordingly the alleged cost of Rs 13.86 per
unit gets reduced to about Rs 5.23 per unit. Further, even this
value is over stated because during pre COD period,
considerable quantity of fuel (mostly oil) is needed for testing
and commissioning of various auxiliaries and during such
activities, no power is generated. The cost of fuel indicated is
only of the fuel consumed and do not include value of stock.
Regarding cost of Initial spares, the objector has failed to
appreciate the Regulations. Capitalisation of Initial spares is
allowed to take care of financing of mandatory and insurance
spares. The same is amply clear from bare reading of SOR
issued by CERC. In the CSERC Regulations too, the
capitalization of initial spares is allowed from COD to cutoff
date. Clearly, the inference that initial spares are the spares
which are consumed prior to COD is grossly misplaced and
devoid of merit. The PV clause is a standard clause. As already
explained in the petition, for labour intensive erection contracts,
rate ceiling is not applied. However, no price variation has been
allowed for the period of time overrun
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Commission’s view:
5.5.3 Commission has examined and disposed the issues under the
power conferred in the Act & Regulation notified thereunder.
The related issues are deliberated in subsequent para of this
order.
5.6 Lack of prudence check:
5.6.1 Shri Satyanarayan Sharmaji (MLA) along with other objectors
pointed out that, neither consumer have been technically sound
nor have adequate knowledge of financial matters to evolve the
project cost. According to him, Commission also does not have
sufficient staff to analyze the project cost. For this purpose, the
project cost should not have been got examined from external
agency. Thus he raised objection without prudence check of the
figures revised project cost should not be approved by the
Commission which leads to inhumanity with the general people
of Chhattisgarh. It is also raised question mark on the prudent
check carried out by the Commission before according approval
of business plan. Further, also alleged that common man does
not have enough technical and commercial expertise to
scrutinize such huge profits. The information provided by the
applicant is mostly incomplete and vague. Also pointed by him
on the date of public hearing is also not convenient to public
being the last day of the financial year as they are required to
fulfill several statutory & other obligations. He also contended
that Commission has not hired the services of any expert
agency who possess enough experience in the evaluation of
capital cost of such huge project as no such requirement is
published by Commission on website and newspapers,
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Commission’s view:
5.6.2 The objection is baseless and unacceptable. The Commission
has dealt every issue judiciously, very minutely and in
transparent way.
5.7 Need of Unbiased decision in Commission:
5.7.1 Shri Satyanarayan Sharmaji (MLA) pointed out that present
Member of CSERC Shri V.K. Shrivastava holds the post of
Managing Director of then CSGPCL therefore he could not have
the right to decide the case. Similarly Shri Rajkumar Gupta of
(Chhattisgarh Nagrik Adhikar Raksha Manch) & Shri Sudhendu
Gupta (Chhattisgarh Harihar Pehredar Samiti) also raised that
6-7 years back when the State Govt. has accorded approval for
Korba West (Ext) project, Shri V.K. Shrivastava was holding the
post of Managing Director of the Trading Company and
thereafter he holds the post of Managing Director of Generation
Company in the same year 2010. Hence any way he is also
responsible for getting the delay in completion of the project.
They also alleged that Shri Shrivastava at present holding the
post of Member in the Commission, hence, raised question on
the legal dispose of the petition in a transparent manner.
Commission’s view:
5.7.2 Regarding the issues raised by the objector in reference to
Member of the Commission, the Commission would like to
clarify that the Commission has been constituted as per
provision of the Electricity Act, 2003 and as per procedure laid
down in the ‘Act’, appointment of Chairman / Member is done
by the State Government on recommendation of a selection
committee. The Commission performs its duties in accordance
with the provisions specified in the Act, Guidelines and
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Regulations. The Commission strongly denies that there is any
biasing in the working of the Commission.
5.8 Audit and certification Related Issue:
5.8.1 Shri Satyanarayan Sharma ji(MLA) that, the project constitutes
various crore of rupee, hence, simply obtaining the certificate
from Chartered Accountant does not contain any element of
cost should not be considered. On the other hand the project
cost should be got audited by the CAG.
CSPGCL Reply
5.8.2 Shri Satyanarayan Sharma ji(MLA) CSPGCL Reply Point no. 4 In
the matter of certificate obtained from Chartered Accountant
towards certification of capital cost of the project it is to state
that before issue of certificate by the Chartered Accountant all
relevant documents was asked by the Chartered Accountant to
submit, on going through the relevant document only Chartered
Accountant issued the certificate. This also filed before the
Commission.
5.8.3 In the matter of certificate obtained from Chartered Accountant
towards certification of capital cost of the project it is to state
that before issue of certificate by the Chartered Accountant all
relevant documents was asked by the Chartered Accountant to
submit, on going through the relevant document only Chartered
Accountant issued the certificate. This also filed before the
Commission.
5.8.4 The CA certificate clearly states :
“We hereby certify that as per information, records, explanation
and audited financial statements of Chhattisgarh State
Generation Co. Limited for the year ended on 31.03.2014
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provided to us the amount of Gross Block of Fixed Assets as on
C.O.D. i.e. 05.09.2013 is RS 2935.96 Cr and as on 31.03.2014
Rs 3073.53 Cr pertaining to New 1x500 mw Korba West
Thermal Power Project, Korba.”
Clearly the certification is based on audited accounts and other
all relevant documents. The audit report of CSPGCL for FY 13-14
is already with the Hon’ble Commission.
Commission’s view:
The CSPGCL has already submitted audit report during tariff
proceeding. The certificate issued by Charter Accountant was
based on the audited figure provided by management which was
already audited by Auditor General of Chhattisgarh. However,
Commission has approved each cost after prudence check.
6. Legal framework
6.1 CSPGCL filed the present Petition for determination of Capital
Cost under Sections 62 and 86(1) (a) and (b) of the Electricity
Act, 2003 and CSERC (MYT Regulation, 2012).
6.2 It is to be noted that CSERC (MYT Regulation 2012) is applicable
till the end of FY 2015-16. Relevant provision of the Regulation
reads as bellow:
“7. CAPITAL INVESTMENT PLAN
7.1 The Generating Company, Transmission Licensee, and
Distribution Licensee shall file for approval of the Commission
a capital investment plan by 31st October 2012. The capital
investment plan should cover the entire Control Period, with
details for each year of the Control Period.
7.2 The capital investment plan may be in respect of new
generation projects or transmission/distribution schemes (for
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lines, sub stations, bays, etc.) for capacity addition/
enhancement or renovation of existing capacities on
completion of life or work required due to change in law, or
deferred execution of work included in original scope or
efficiency improvement or such works of value more than Rs.
1Crore which may be expedient for safe operation of the
system.
(a) The capital investment plan shall show separately, on-
going projects that will spill over into the Control Period, and
new projects (along with justification) that will commence in
the Control Period but may be completed within or beyond the
Control Period. The capital investment plan shall contain the
scheme details, justification for the work, capitalization
schedule, capital structure and cost benefit analysis (where
applicable).
7.3 The Commission shall scrutinize and approve the capital
investment plan after prudence check and after giving due
opportunity to all the stakeholders to offer
views/suggestions/objections and holding a hearing on the
proposed plan and after taking into consideration the
objections/ suggestions so received and any additional
information provided by the applicant.
7.4 The Commission shall approve the capital investment plan
before issuing the tariff order and shall consider the impact of
approved capital investment plan in the tariff order.”
6.3 As regards Capital Cost, relevant portion of Regulation-18 read
with Regulation-19 of CSERC (MYT Regulation, 2012) specified as
under:
18. CAPITAL COST AND CAPITAL STRUCTURE
18.1 Capital cost for a project shall include:
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(a) the expenditure incurred or projected to be incurred,
including interest during construction and financing
charges, any gain or loss on account of foreign exchange
risk variation during construction on the loan, up to the
date of commercial operation of the project, as admitted by
the Commission, after prudence check;
(b) capitalized initial spares subject to the ceiling rates
specified in Regulation 18.3; and
(c) additional capital expenditure determined under
Regulation 19:
Provided that the assets forming part of the project, but not
in use shall be taken out of the capital cost.
18.2 The capital cost admitted by the Commission after
prudence check shall form the basis for determination of
tariff:
Provided that prudence check may include scrutiny of the
reasonableness of the capital expenditure, financing plan,
interest during construction, use of efficient technology,
cost over-run and time over-run, and such other matters as
may be considered appropriate by the Commission for
determination of tariff:
Provided that where the actual capital cost is lower than the
approved capital cost, the actual capital cost shall be
considered for tariff determination. Any escalation in
capital cost over and above the approved capital cost may
be considered by the Commission subject to prudence
check or independently vetted by the Commission. ………..
Provided also that where the long-term power purchase
agreement entered into between the generating company
and the beneficiaries or the transmission service agreement
entered into between the transmission licensee and the
beneficiary, as the case may be, provide for ceiling of actual
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expenditure, the capital expenditure admitted by the
Commission shall take into consideration such ceiling for
determination of tariff.
18.3 The capital cost may include capitalized initial spares.
Initial spares shall be capitalized as a percentage of the
original project cost, subject to following ceiling norms:
i. Coal-based/lignite-fired thermal generating stations -
2.50%
……………
18.5 The average capital cost during a year shall be
computed as average of opening and closing gross fixed
assets for the year.
Provided that for the new generating station or unit, the
capital cost shall be charged on pro-rata basis during the
year for the asset declared under commercial operation and
for subsequent years, the capital cost shall be computed on
the average asset base.
19. ADDITIONAL CAPITALIZATION
19.1 The capital expenditure incurred or projected to be
incurred, on the following counts within the original scope
of work, after the date of commercial operation and up to
the cutoff date may be admitted by the Commission,
subject to prudence check:
i. Un-discharged liabilities;
ii. Works deferred for execution;
iii. Procurement of initial capital spares within the original
scope of work, subject to the provisions of Regulation 18.3;
iv. Liabilities to meet award of arbitration or for compliance
of the order or decree of a court; and
v. Change in law:
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Provided that the details of works included in the original
scope of work along with estimates of expenditure, un-
discharged liabilities and the works deferred for execution
shall be submitted along with the capital investment plan.
19.2 The capital expenditure incurred on the following
counts after the cut-off date may, in its discretion, be
admitted by the Commission, subject to prudence check:
i. Liabilities to meet award of arbitration or for compliance
of the order or decree of a court;
ii. Change in law;
iii. Deferred works relating to ash pond or ash handling
system in the original scope of work;
6.4 This Order is passed according to the provisions of CSERC (MYT
Regulation, 2012).
7. Submission including additional submissions of petitioner
on the CAPITAL COST OF KORBA WEST TPP:
7.1 CSPGCL submitted that proposal for developing I X 500 MW
Korba West TPP was approved by the Board of directors of
CSPGCL vide resolution dated 25/03/2008. CSPGCL submitted
that as per the said Resolution, the approved cost estimates were
for Rs. 1,111.00 crore which including freight and erection,
testing & commissioning but excluding taxes and duties which will
be paid on actual. The delivery schedule was expected to be
accomplished in 42 months period. The price variation for this
project is subject to price variation clause as per the PV formula
of 2X500 MW Mouda Project subject to ceiling of 15% for supply
portion only. The IEEMA indices shall be used for electrical and C
& I. The petitioner further submitted that the cost was revised by
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BoD on 26/09/2013 at Rs 3,671.00 crore (+/- 2%) excluding cost
of spares. The spares to the extent of 2.5% of the project cost
may be procured. The petitioner submitted that the BOD vide its
resolution dated 26/11/2014 further revised the capital cost of
Rs. 3,696.18 crore plus 2.5% towards initial spares for Korba
West (TPP).
7.2 CSPGCL submitted that the project cost capitalised on COD of the
Unit is Rs. 2,935.96 crore. Further capitalization as on
31/03/2014 was Rs. 3,073.53 crore. CSPGCL in confirmation of
capitalization has submitted the CA certificated. The comparison
of various components of Capital Cost as per business plan
approved by Commission and expected capital expenditure as
submitted by CSPGCL is given in Table below:
Comparison of Business Plan and Capital Cost submitted by CSPGCL
(Rs. crore)
Particulars Business Plan Capital Cost
Land & Site Development 57.19 41.00
BTG 1365.45 1490.94
BoP 993.00 1146.02
Taxes & Duties 175.00 166.80
Start-up Fuel 35.00 68.63
Overheads 134.00 121.33
IDC 397.00 661.46
Total 3156.64 3696.18
7.3 The key reasons for deviation in approved business plan order
dated 01/06/2010 vis-à-vis capital cost proposed by CSPGCL as
submitted in this petition and Commission’s view on various
component of capital cost are detailed in subsequent section of
this Order.
Page 30 of 77
Brief Background of Project Commissioning
7.4 CSPGCL has submitted that initially it was envisaged that the
HTPS Korba West TPS of 4X210 MW capacities shall be expanded
to include two more independent sets of 210 MW. Later on, the
concept was modified for installation of 2-sets of 250-300 MW.
Accordingly, a detailed Project Report was prepared. The
feasibility studies including Environmental and Forest clearances
were obtained for total 500 - 600 MW capacity. The technical
parameters and project cost was considered for 250 MW sets.
However, before physical start of the project, decision was taken
for installation of one set of 500 MW instead of two sets of 250-
300 MW. It may be appreciated that 500 MW sets offer better
thermal efficiency and consumes less natural resources. Thus, it
is advantageous for the consumers and more environments
friendly too. As, the feasibility studies such as EIA (Environment
Impact Study), Coal commitment. Water commitment, Land
requirement etc., remain applicable for 500 MW set in the same
manner as was applicable for two sets of 250 MW. The fact has
been acknowledged by all the stakeholders including Government
of Chhattisgarh, the lender (PFC), the Coal India, and WRD etc.
7.5 In continuation of pre-para the petitioner further submitted that,
the Board has also accorded its approval vide resolution dated
25/03/2008. As per the said resolution, the approved cost
estimate was for Rs. 1,111.00 crore. In the said Board
Resolution, it was concluded that the BTG package along with
electrical and station C&I was awarded to M/s BHEL on the same
techno-commercial condition as those on which NTPC has placed
order to BHEL for 2X500 MW TPP Mauda project, except the
condition relating to payment terms, LD, delivery schedule (i.e.
42 months) and price variance clause (PVC) (subject to ceiling of
15% for supply portion).
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7.6 CSPGCL submitted that the installation of 500 MW sets was also
for first time recognised by the Commission in its Tariff order for
FY 2009-10. Moreover, the change in cost estimation was
submitted to the Commission in the Business plan petition no. 08
of 2010 with expected date of commissioning as June-2012. The
Commission on assessing the capacity addition programme
submitted by CSPGCL with reference to the provisions of the
Electricity Act, 2003, Tariff Policy and Tariff Regulations accorded
in-principle clearance of the proposed capacity addition
programme vide its order dated 01/06/2010.
7.7 CSPGCL submitted that the BTG contract was awarded to BHEL
on the basis of Mauda project decided on ICB route by NTPC, by
the negotiation committee of CSEB which comprises of one senior
member from CEA. The LOI was issued on 11/04/2008 at total
contract price of Rs. 942.00 crore excluding taxes, duties and
price variation as per PV formula of Mauda TPP subject to ceiling
of 15% over and above the contract price i.e. Rs. 942.00 crore,
for supply of BTG. However, for transportation, insurance,
installation, testing and commissioning of BTG, the LOI was
issued on 11/04/2008 for an amount of Rs. 169.00 crore
exclusive of taxes i.e. Rs. 26.00 crore towards transportation and
Rs. 143.00 crore towards installation services including insurance.
For both LOI, the base date to arrive at the PV formula as
17/03/2008. Later on, CSPGCL submitted that zero date was
amended to 31/12/2008 with a condition that no escalation shall
be payable due to shifting of zero date.
7.8 CSPGCL submitted that the BOP contract was awarded to M/s.
Techpro System Ltd. through ICB route on 25/08/2009 for a total
contract value of Rs. 580.50 crore for designing, engineering,
manufacturing, fabrication, assembly, inspection and testing of
BOP inclusive of all taxes. The PV will be adjusted in accordance
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with the conditions of the contract subject to ceiling of 15% for
supply during the contract period. Further, for services for civil
works, structural steel, fabrication and erection, architectural and
other infrastructural works etc. including steel cement and other
construction materials transportation, insurance & installation
contract awarded for Rs. 412.50 crore was given inclusive of all
taxes.
7.9 CSPGCL submitted that project was financed through Power
Finance Corporation (PFC) and MOA was signed on 20/06/2008
for total project cost of Rs. 2,309.19 crore. Against the project
cost PFC has sanctioned the loan amount of Rs. 2,078.00 crore.
Further vide amended agreement dated 30/03/2011 the loan
amount was enhanced from Rs. 2,078.00 crore to Rs. 2,840.22
crore which was approved as per Board resolution dated
22/03/2011 subject to that in the event of reduction in project
cost by CSERC the loan amount shall be reduced proportionately.
7.10 CSPGCL submitted that through second amendment of agreement
dated 13/05/2014 with PFC the total loan amount was further
enhanced to Rs. 3,369.98 crore as per Board’s resolution dated
29/03/2014.
7.11 CSPGCL submitted its response to the Commission query on
starting date of project, expected date of synchronization and
expected COD versus actual achievement, as against detail
project report, referred above, as no fix date of commencement,
synchronization and COD is mentioned, hence comparison of such
dates envisaged in the DPR vis-a-vis actual dates is not possible.
The actual dates of COD have already been submitted in the
petition i.e. 5th Sep 2013.
7.12 Petitioner further submitted that in the business plan as approved
by Commission, the expected commissioning date of the unit was
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considered as June 2012. However actual commissioning took
place in 22nd March 2013. Thus additional time taken is about 9
months.
7.13 CSPGCL submitted that normally delay in implementation of
project on contract basis are analysed at the time of closure of
contract. However delay in completion of project is on accounts of
two major reasons:
Re-selection of agency for erection of Chimney:
7.14 CSPGCL submits that erection of chimney is one of the most
critical and time taking civil structure in the power station. Apart
from other critical civil works, Chimney construction work was
also awarded to M/s BHEL on cost plus basis. BHEL, through a
bidding process, selected M/s Ganon Dunkerley (GDCL) for the
said work and accordingly CSPGCL communicated its approval on
16/09/2009.
7.15 CSPGCL submitted that however, on 23rd September 2009, the
Chimney which was being constructed by M/s GDCL in the
premises of BALCO power house collapsed wherein more than 40
persons have lost their life. It may be appreciated that in the
aftermath of the fatal accident, it was the call of the prudence
that till the enquiry is finalized and actual cause for the
disastrous failure are ascertained, all the agencies involved in the
work must be avoided. Accordingly, vide letter dated 09/10/09,
CSPGCL withdrew its acceptance for award of contract to GDCL
and asked BHEL to appoint some other competent agency.
7.16 CSPGCL submitted that accordingly, BHEL did not award the work
to GDCL and after retendering another agency Prasad & Co. was
appointed for the erection of Chimney. However, taking into
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various aspects involved, the entire process took considerable
time.
7.17 CSPGCL further submits that taking a cue from the fatal accident
at BALCO site, all the agencies involved were repeatedly insisted
to exercise due caution during the construction/ erection work.
Therefore, during construction, taking into account site specific
conditions, engineering modifications were incorporated and
additional piling and additional load testing of piles was done to
suite the soil conditions.
7.18 CSPGCL submitted that though all out efforts were made to
expedite the work, but there was a limited scope. Chimney
involves considerable concrete work which needs proper curing
and settling time at each stage. CSPGCL, as a committed public
utility has never compromised safety. Moreover, as per standard
practice, chimney construction takes about 900 days. It may be
appreciated that Chimney was completing by February 2013 and
the generating unit was commissioned within one month after its
readiness.
7.19 CSPGCL further submitted that meanwhile, to expedite the other
works and to reduce the time between readiness of Chimney and
synchronization of generator, boiler light up was done by erection
of a temporary chimney. In a Business like ours, it would have
taken at-least additional 3-4 months from the readiness of
chimney to synchronize, which was cut-short with such timely
and ingenious intervention.
7.20 Petitioner further confirmed that It proves conclusively that
during project execution it not only exercised and accounted for
all precautions which any logical and prudent organization should
exercise but has also tried its level best to expedite the project in
time and left no stone unturned.
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7.21 Petitioner also submits that in the given situation, if the additional
time is not considered, it will generate a wrong message that
exercise of prudence in a crucial matter related with safety may
have cost implication for developers and thus will de-motivate
developers to exercise prudence in such matters.
Agitation in Ash dyke Area:
7.22 CSPGCL submitted that ash bund is one of the key project areas
whose completion is essential for commercial operation of the
project by discharge of ash. The awards of land acquisition were
passed on 30/05/2006, at that time the state’s R&R 2005 policy
was in force. However, in the year 2007 the state government
comprehensively revised the R&R policy. Therefore, the land
oustees of ash bund area started demand that their cases should
also be reviewed as per revised policy. Thus the agitation in the
ash bund area resulted in total work stoppage.
7.23 CSPGCL submitted that being an issue touching the life of
hundreds of Project Affected Persons (PAPs), the matter did not
remain a static legal issue but exploded in a sensitive political
issue involving law and order dimension too. It may be
appreciated that the human expectations are functions of social
and political spectrums and are not controllable for a project
developer. On one hand there was a settled legal agreement
wherein the liabilities of CSPGCL were already fulfilled and on the
other there were demand of the PAPs that they need to be
compensated on the same level at which other persons are being
compensated for similar projects. It may be appreciated that
tackling human sentiments and working out a path of
compromise always take considerable time and effort. It took
number of discussions (mostly informal) to consolidate the
issues. Then all out efforts were made to resolve the conflict.
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7.24 CSPGCL further submitted that land acquisition is done by a
settled process through revenue department of state.
Accordingly, help of revenue and administration authorities were
also sought. The issue was also deliberated in the periodic project
review meetings. Finally solutions were worked out and work got
restored, but even such restoration has its own glitches and even
subsequently, discussions continued to keep things under control.
7.25 CSPGCL submitted that as an evidence of continued high-level
persuasion and effort, a copy of MOM reached between a
delegation of land oustees (headed by Shri Banwarilal Agrawal
Hon’ble Ex- deputy speaker of Chhattisgarh Vidhansabha,
Chairman State Power Companies and Energy Secretary GoCG) is
submitted herewith.
7.26 CSPGCL submitted that finally one ash bund could be made ready
in July 2013 and subsequently COD was achieved in September
2013.
7.27 CSPGCL submitted that the issue of R&R is a broader issue which
is settled on policy framework drawn on social and political fabric
and is basically uncontrollable for a project developer.
7.28 CSPGCL further submitted that it may not be out of place to
mention that Seepat Phase-I project of NTPC, located in Bilaspur
district of Chhattisgarh, got delayed by about 40 months. NTPC in
its petition has mentioned that one of the factors resulting in
delay in execution was problem of work interruptions by land
oustees. It also, on record, has submitted that the problem could
be resolved only after intervention of Hon’ble Chief Minister of
Chhattisgarh. CERC has accepted the pleading of NTPC and has
allowed the capital cost (without deduction of capital cost on
account of time/ cost overrun). In the instant case too, State
Govt. has been quite considerate.
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7.29 CSPGCL submitted that owing to the reasons as stated in the
above foregoing paras, the time overrun is uncontrollable.
Comparison of Capital Cost:
7.30 CSPGCL submitted in response to query raised by Commission
vide its letter no. 672 dated 06/04/2015 to submit comparisons
of project cost with NTPC Mauda which is the latest submission,
available on public domain relating to Capital cost based on
petition filed by NTPC limited in August 2014 before Hon’ble CERC
for determination of Tariff for the period 01.04.2014 to
31.03.2019. NTPC on affidavit, has claimed the Capital cost of the
project on 31.03.2017 (cut-off date) as Rs. 6,696.53 crore. The
petitioner further clarifies that the additional capitalization in the
FY 17-18 and FY 18-19 quoted in the petition, has not been
accounted for the instant comparison, as the same is quoted for
the works related to rising of ash dyke, which is planned to be
taken up after cut-off date. In order to have comparison, only the
project cost up to cut-off date is being compared.
7.31 CSPGCL submitted that NTPC Mauda Capital cost for Rs. 6,696.53
crore is cost of two units of 500 MW each. Again, in order to be
fair, before venturing into comparison with Korba West TPP, it
may be appreciated that the cost of first unit need to be derived,
based on some just and logical rationale. The Hon’ble CERC vide
its order dated 04.06.2012 has provided benchmark capital cost
for thermal power projects. The benchmark cost provided in the
order is the hard cost, excluding, IDC, overheads and project
specific features. From a bare perusal of the CERC benchmark
cost order, it may be noted that for a new project comprising one
unit of 500 MW capacity, the benchmark hard cost is Rs 5.08
crore/MW, while for two units of 500 MW each, the benchmark
cost is Rs 4. crore/MW.
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S.N. Particulars One unit
Two Units
1. Hard cost, excluding IDC, Overhead , Project specific features etc (Rs Cr / MW)
5.08 4.71
2. Hard Cost in Rs crore 2540 4710 3. Marginal Cost of Unit-II in Rs crore
(Total cost of two units – Cost of Unit-I)
2170
4. Per MW Marginal Cost of Unit-II 4.34 5. % Unit-I cost in Total Cost of 1000
MW plant 53.93%
6. % of Unit-II Cost in Total Cost of 1000 MW plant
46.07%
7.32 CSPGCL further clarifies that based on the above assumption the
total project cost of Mauda Plant is segmented unit wise as
under:
S.N. Particulars Unit -I Unit -II
1. Total Project Cost (Rs Cr.) 6696.53 2 Percentage Cost of unit in the
Project cost (as derived from CERC benchmark cost order)
53.93% 46.07%
3 Unit wise Capital Cost (Rs Cr.) 3611.29 3085.24
7.33 The petitioner submitted that the above cost of Rs 3,611.29 crore
is the capital cost inclusive of initial spares. Again, to be fair in
comparison, CSPGCL understands that the above cost will have to
be re-appropriated considering cost of initial spares, taxes and
duties and others suitably to arrive at the project cost of unit – I,
so that the same can be compared with project cost of Rs
3,696.18 crore of Korba West TPP. The NTPC petition, is an
aggregated tariff petition, it does not contain, the breakup of
project cost and the initial spares. In absence of specific data in
the NTPC petition, to be conservative, in its approach, the
maximum permissible value of initial spares may be presumed,
so that it can be said with certainty that the computed value is
the minimum value which must be assigned to Mauda Unit–I.
Page 39 of 77
CSPGCL states that the Mauda Project achieved CoD on
30.03.2014 and as per the prevailing CERC MYT Regulation 2009-
14 the maximum allowable cost of initial spares was 2.5% of the
project cost. Accordingly, to derive the project cost of Unit-I, the
total capital cost of Unit-I is grossed down by 2.5% (max.
allowable initial spares). Thus, the derived project cost of the
units comes out as under :
Capital Cost assigned to unit-I : Rs. 3611.29 Cr
Max. Initial Spares : 2.5%
Minimum Project Cost of Unit-I
{Capital cost / 1+2.5%)}
: Rs. 3523.21 Cr
7.34 CSPGCL submitted that in comparison to above project cost of
Korba West TPP, up to cut-off date is estimated to be Rs 3,696.18
crore. Thus, apparently, between the two projects, there is a
project cost difference of Rs 172.97 crore.
7.35 CSPGCL submitted that the reasons for this project cost
difference are due to the difference in financing pattern. The
audited IDC on Korba West TPP is 705.68 crore based on 90: 10
debt equity financing. The Mauda project was financed at 70:30
debt equity ratio. Again, in fair comparison, the IDC at Korba
West TPP needs to be scaled down to 70:30 project cost
financing. In a simplistic manner, using pro-rata algorithm, the
IDC at hypothetical 70:30 debt equity ratio and corresponding
project cost is computed and tabulated as under:
IDC at 90:10 debt : equity ratio : Rs 705.68 Cr
Project Cost without IDC : Rs. 2990.5 Cr.
Hypothetical pro-rata IDC at 70:30 : Rs 548.86 Cr.
The hypothetical project cost at 70:30 : Rs 3539.36 Cr.
Page 40 of 77
7.36 CSPGCL submitted that as per GOI Mega Power policy framework,
Mauda Project being a 1000 MW project decided on ICB route was
entitled for tax concessions, while Korba TPP had no such benefit.
The taxation policy and incentives thereon, are a government
prerogative and for CSPGCL they stand uncontrollable.
7.37 CSPGCL submits that clearly, on a very simplistic basis too, it can
be said, that had the Korba West TPP would have also been
financed on 70:30 debt equity ratio, on account of lower IDC and
taxation difference, it would have resulted in lower capital cost of
about Rs 3,438.36 crore, which is less than the computed project
cost of Mauda Unit-I of Rs 3,523.21Crore. However, it raises a
question, that under such situation, whether, financing on D:E
ratio of 90:10 was beneficial to end consumer or not ? The
question is answered in subsequent para.
7.38 CSPGCL further stated that while working out the ex-bus tariff of
any power station, there are three main component of AFC which
are related to Capital cost of the project. These are Return on
Equity, Interest on Loan, and Depreciation. A comparison of the
effect of financing on theses three components is undertaken. For
the purpose of comparison, to be conservative in the estimates,
the grossed up rate of ROE, even considering the Minimum
Alternate Tax (instead of Corporate Tax), taken as 20.3785%.
The Interest rate is considered at 13% and weighted average
depreciation for thermal projects is considered at 5.28% (in-line
with the industry trend).
Page 41 of 77
The comparison under two scenarios is as under:
(Rs in Cr.)
Particulars Scenario – I Debt : Equity
ratio 90:10
Scenario – II Debt : Equity
ratio 70:30
Project Cost 3696.18 3539.36
Debt 3326.56 2477.55
Equity 369.62 1061.81
Interest 432.45 322.08
ROE (@20.8375%) 75.32 216.38
Depreciation 195.16 186.88
Total (AFC related
to capital cost) 702.93 725.34
7.39 CSPGCL submitted that thus with 90:10 Debt equity ratio,
Consumer gains significantly. Though the capital cost appears
higher, yet even the first year AFC is about 22.00 crore lower
than the project which gets financed at 70:30 ratio. From second
year onwards, with reduction in loan, every year, the gain to
consumer increases and at the end of loan tenure, it reaches to
more than Rs. 130.00 Cr per annum. It also partly explains that
why inspite of huge financial muscle, resulting in far cheaper
global sources of finances, NTPC’s Mauda tariff is higher than the
CSPGCL’s Korba West TPP.
7.40 The petitioner also submitted that, as Mauda BTG prices formed
the basis for negotiated prices of BTG of Korba West TPP, as
desired, a comparison of the order values of Mauda BTG and
Korba West TPP is also submitted. They also stated that a senior
representative from CEA has also been nominated in the
negotiation committee.
7.41 CSPGCL submitted in response to the discussions held during TVS
one such issue is cost of Land at Mauda, it was stated that Mauda
cost included cost of land, while in case of Korba TPP the same
was not inclusive, hence Korba West TPP may not be compared
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with Mauda Project. It is submitted that while Mauda project
included land cost, Korba West TPP included the cost of Long
Distance Coal Conveyor system (one of the longest in the India).
The cost of LDCC is substantial almost equal to the cost of land in
Mauda. Thus, the land factor has been adequately countered by
the LDCC cost. Further, the LDCC is going to benefit the
consumer substantially, as the cost of transport of coal through
LDCC is substantially lower than the cost of coal transport by any
other means, which is resulting in lower ECR than many other
projects.
7.42 CSPGCL submitted that regarding loan swapping though it tried
for refinancing but it was suggested by the expert agency in
banking arena, that switchover of loan may be possible/
beneficial only after completion of loan drawl. Thus, it was
advised that as normally bankers don’t feel comfortable with such
high debt equity ratio, in all probability, any changeover move in
between, would have resulted in refinancing of only the loan
already disbursed by PFC, without any recourse to balance loan.
Such a situation would have resulted in starvation of funds and
stalling the project execution. This would have not only delayed
the project, but would have compromised the commission’s
direction too.
7.43 In response to the Commission’s direction on comparison of hard
cost with bench mark cost worked out by CERC vide its order
dated 04/06/2012 for TPP with coal as primary fuel, CSPGCL
submitted that while comparing of hard cost of Korba West TPP
i.e. Rs. 4.76 crore/MW against benchmark capital cost (hard cost)
of Rs. 4.92 crore /MW.
Page 43 of 77
COMPARISON OF HARD COST OF 1X500 MW KORBA WEST TPP
WITH RESPECT TO CERC NORMS AS SUBMITTED BY CSPGCL
(Rs. In crore)
SN Head as
per DPR
PARAMETERS VALUE Change in
cost due
to
PVC/chan
ge in
scope
TOTAL Cost / MW
(Rs. In
crore/MW)
1 ORDER VALUE
Plant and equipments : The hard cost with
Dec 11 level works out to be Rs. 2350 by prorate basis for PVC. And adding TG
initial spares as 33 Crs as per order the hard
cost per MW as Rs. 4.76 Crs. As
against Rs. 4.92
Crs./MW for TPP and Rs.
5.08 Crs./MW for greenfield projects
BTG supply 942 66 1008
BTG service (Election) 143 53 196 BTG service (Freight) 26 26
BOP 993 139.02 1132.02 Additional cost for external CHP modification
15.96 15.96
BTG civil including steel and cement
246 13.27 259.27
Taxes and duties 183.45 183.45 TOTAL 2533.
5
287.25 2820.7
2 Less External CHP and taxes and duties 402.45 30.66 433.11 Hard cost with June 12 level 2388
3 Other project specific expenses like preliminary and civil works, project management charges, training cost/cost of overhead construction, contingencies, consultancy and engineering charges, other miscellaneous expenses, working capital margin, IDC etc.
622.55 875.48
TOTAL 3156 3696.18
As per CERC order dated 04.06.2012 total hard cost with Dec. 2011 as base: INCLUDES : Steam generator/boiler island, turbine generator island, associated auxiliaries transformers, switchgears, cables, cable facilities, grounding & lighting packages, control and instrumentation, initial spares of BTG, balance of plant including cooling tower, water system, coal handling plant, ash handling plant, fuel oil unloading & storage, mechanical miscellaneous packages, switchyard, chimney, emergency DG set. EXCLUDES: MGR, Railway siding, unloading equipment at jetty, and rolling stock, locomotive, transmission line till the point.
8. Component wise analysis and decision of the Capital Cost
of the Project
8.1 Cost of the project.
8.1.1 The petitioner submitted that earlier, in the year 2008 the then
CSEB decided to install a new 500 MW unit in the premises of
existing 4X210 MW HTPS Korba West plant. For any
infrastructure project, the civil work precedes all the other
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erection and commissioning activities. The Civil works were
awarded to BHEL on 31.12.2008 and accordingly the same has
been considered as zero date for the project.
8.1.2 The CSPGCL submitted that the detail proposal for capital cost
approval, amounting to Rs 3,156 crore (exclusive of PVC and
initial spares), of Korba West 1X500 MW project was part of the
Business plan submitted to the Commission in 2010. Copies of
the orders for BTG and BOP along with PFC loan agreement and
all other related documents were submitted before the
Commission. After due process, in the order dated 1st June,
2010 (Petition no. 8 of 2010 (M)), the Commission considered
the estimated cost of Rs. 3,156 crore.
8.1.3 The Petitioner submitted that the Commission has approved in-
principle project cost for Korba West TPP. However, the cost so
considered was an initial estimate exclusive of price variation
and cost of initial spares. Further, in the above cost, while the
cost of BTG and BOP was considered on the basis of orders, cost
such as Interest During Construction (IDC), Overheads and
working capital margin were notionally estimated.
8.1.4 The Component wise comparison of originally approved cost vis-
à-vis actual cost and reasons for variance is submitted in
subsequent paragraphs.
8.2 Land & Site Development including Preliminary & Enabling
expenses:
8.2.1 The Petitioner submitted that it had estimated an amount of Rs.
57.19 crore towards land & site development including
preliminary & enabling expenses. As against this, the revised
estimated expenditure on account of these heads is Rs. 41
crore. The revised estimates are lesser than the original
Page 45 of 77
estimates and closer to the actual. The main sub
components are land cost, costs of Rehabilitation &
Resettlement (compensation to land oustees at NAREGA rates &
welfare works at ash bund affected villages) and other
enabling expenses (i.e., project manager office, tower &
distribution transformer shifting, colony electrification,
construction power, store shed, shifting of 33 kv lines,
diversion of ash pump line, construction of boundary wall,
scrap yard, construction of diversion road and boundary wall of
steel scrap yard, strengthening of railway track, etc.).
Commission View:
8.2.2 It is observed that during the filing of business plan petition for
approval, the CSPGCL had estimated land cost with
rehabilitation and resettlement at Rs. 24.19 crore and estimated
expenses towards preliminary investigation and site
development was Rs. 33.00 crore. However, upto COD of the
project, CSPGCL submitted that actual cash expenditure
towards land with rehabilitation settlement is Rs. 17.54 crore
and preliminary investigation and site development cost is Rs.
21.83 crore. In addition, CSPGCL also submitted that the un-
discharged liability amounts to Rs. 1.63 crore. Accordingly, the
actual cash expenditure upto the COD is approved as Rs. 39.37
crore. Also, Rs. 1.63 crore is approved for meeting the un-
discharged liability to be capitalized within cut-off period on
actual basis after prudence check.
8.3 BTG including BTG Civil works
8.3.1 Plant and Equipment Cost:
8.3.1.1 The petitioner submits that proposal for developing 500 MW
Korba West Project was approved by the Commission with
total project cost of Rs. 3,156 crore. This includes the plant &
Page 46 of 77
equipment cost of Rs. 2,533 crore. In addition, they also
submit that the said approval was exclusive of price variation
and initial spares.
8.3.1.2 The Petitioner submits that as submitted in the Business Plan
Petition No. 8 of 2010 (M), the main Boiler- Turbine-
Generator (BTG) E&M package for the project was awarded to
BHEL on the negotiated rates derived on the basis of Mauda
project of NTPC. The rates for BTG package for the
Mauda were derived through International Competitive
Bidding (ICB). Petitioner also submitted that the Electricity
Act, 2003 envisages that the rates derived through bidding are
considered as fairly competitive and acceptable. Besides this,
the contract for BTG civil portion was awarded to BHEL on cost
plus basis and the cost of civil works was derived by BHEL on
competitive bidding basis. Though the order values were
exclusive of taxes, duties and Price variation, however, the
formula and methodology for computation of PV clause was
specified in respective orders.
8.3.1.3 CSPGCL submitted that the Balance of Plant (BOP) component
for the TPP was awarded through the International
Competitive Bidding (ICB), which ensures that the cost
reasonableness remain undoubted. The BOP cost discovered
through ICB was Rs 993.00 crore. This was also part of the
original plant & equipment cost estimate at Rs 2,533.00 crore
approved by the Commission. It also submitted that since the
approval granted by the Commission was based on the
ordering cost hence the same did not factor in the impact of
price variation. However, as submitted in pre-para, in the LOI
considered for the approval, the formula and methodology for
computation of PV clause was clearly specified.
Page 47 of 77
8.3.1.4 CSPGCL submitted that during the construction, erection and
commissioning, the price indices moved significantly. Being a
high value & long period contract, like any other contract of
this nature in India, contract has Price Variation Clause (PVC)
in the orders considered for the approval. The PVC clause is
clearly stipulated in all the BTG and BOP orders. Prices are
subject to variation in accordance to formula adopted as per
standard industry practice and national level recognised price
indices. As per terms of contracts, allowable price variation is
limited to the contractual work completion period. Hence, time
overrun do not burden the project cost with undue Price
variation. The inflationary trend resulted in increased hard cost
due to significant PVC. Accordingly, states that based on the
actual (detailed justification and limiting value detailed in
subsequent para), impact of price variation deserves to be
included to arrive at the revised base hard cost.
8.3.2 BTG, Electricals and Stations C&I (BTG Supply):
8.3.2.1 Petitioner submits that the contract entered with the M/s BHEL
stipulate that Prices will be subject to price variation clause as
per the PV formula subject to ceiling of 15% for supply.
However, IEEMA indices to be used for electrical and C&I.
Accordingly, the revised estimated cost pertaining to the BTG
supply amount to Rs. 1,008 crore as against the price of Rs.
942 crore stipulated in the award of work considering the
applicability of the price variation clause as per contract.
Moreover, the revised estimated increase in the cost amounts
to only 7% which is well within the ceiling of 15% prescribed
in the Contract.
Page 48 of 77
Commission’s view
8.3.2.2 The submission of CSPGCL has been examined in detail. It is
observed that based on ICB route followed by NTPC for their
Mauda Project, BHEL was awarded the BTG contract for supply
of BTG electrical and station, C&I package. Subsequently the
price were negotiated by a committee which included one
senior representative of CEA and the cost of BTC equipments
were approved as Rs. 942 crore. The contracted price was
subject to price variation at ceiling of 15%.
8.3.2.3 It is also observed that as per the LOI the BHEL has to
complete the scope of work within 42 months from the zero
date i.e. 31/12/2008. As per the contract, in case BHEL failed
to achieve the targeted date, the liquidated damage clause
had to be applied. The expected commissioning date as per
business plan order is June 2012. However, as per the
submission made by the petitioner the commissioning was
achieved on 22/03/2013. Hence, it is noted that the contract
was delayed by 9 months.
8.3.2.4 It is observed that as per CSPGCL submission, they have
considered Rs. 65.94 crore towards PV, as such the contract
value is revised to Rs. 1,007.94 crore. This implies that total
increase in contract value is 7% which is well within the limit
of 15% price variation cap as stipulated in LOI.
8.3.2.5 Further, it is felt that liquidated damage should be applicable
on the total contract. Commission has detailed its approach on
liquidator damage in subsequent section of this order.
Page 49 of 77
8.3.3 Transportation, Insurance, installation, testing &
commissioning, guarantee tests:
8.3.3.1 CSPGCL submitted that for Transportation, Insurance,
installation, testing & commissioning, guarantee tests Prices
will be subject to price variation clause as per the PV formula.
Further the price of the said award of work was considered as
Rs. 26 crore towards freight and Rs. 143 crore towards
erection. The Petitioner submits that there is no revision in the
cost pertaining to freight and shall remain Rs. 26 crore only.
However, it is expected that the revised estimated expenses
for BTG erection would amount to Rs. 193 crore on account of
increase in cost due to PV formula. In erection contracts, as
the prime factor is related to labours payments, hence as per
industry practice, the PV clause do not contain rate ceiling in
terms of percentage rather it has time ceiling in terms of
schedule completion.
Commission’s view
8.3.3.2 Commission is of the view that the cost towards freight as
approved in the business plan was Rs. 26 crore and as there is
no change in the freight cost. However, the cost towards
erection as approved in the business plan was estimated to be
Rs. 143 crore which has now been revised to Rs. 193 crore.
According to petitioner prime factor in increase of 35% in cost
in erection contract was basically due to labour payment cost.
The PV clause does not specify ceiling in terms of percentage
rather it has time ceiling in terms of schedule completion of
work by labours. Considering the petitioners submission in
terms of ceiling of price variation that in case of erection
contract which is mostly related to labours, hence PV in terms
of percentage should not be ceiling on the contrary the time
Page 50 of 77
ceiling in schedule completion should be applicable. As per the
terms of LOI, the liquidated damage clause should have been
applicable and same is detailed in subsequent section of this
order.
8.3.4 BTG Civil including taxes:
8.3.4.1 The Petitioner submits that vide Amendment No. 1 to
notification of award issued on 11 April, 2008, stipulated that
M/s BHEL shall place order for associated civil works for BTG
and electrical equipments and stipulated that BHEL shall
process the contract of award. The contract placed for
associated civil works also had the clause of Price Variation
and accordingly it is estimated that the total expenses towards
BTG Civil works amount to Rs. 264 crore as against Rs. 254
crore estimated earlier (PV less than 4%).
Commission’s view:
8.3.4.2 The petitioner's submission indicates that by considering the
inflation indices, there is an increase of only 4%. The total cost
incurred by the CSPGCL is Rs. 264 crore as against Rs. 254.45
crore which includes Rs. 8.45 crore towards taxes and duties
as per submission made by CSPGCL in table for comparison of
hard cost vis-à-vis CERC benchmark cost.
8.3.4.3 The Commission considers the revised estimates of the
petitioner for BTG civil including taxes as Rs. 264 crore. This is
inclusive of Rs. 13.27 crore due to PV and Rs. 4.73 crore
towards taxes and duties.
8.3.4.4 Since the awarded work of BTG to BHEL is still under process,
Commission observes that liquidated damage clause should be
applicable and is detailed in subsequent section in this order.
Page 51 of 77
8.3.4.5 The total cost considered in this order towards BTG including
BTG civil are as under:-
Rs. in crore
Particular As per
Approved Business
plan
Revised
estimate by
petitioner
Estimated
Cost
BTG Equipment 942.00 1007.94 1007.94 BTG service (erection)
143.00 193.00 193.00
BTG service (freight)
26.00 26.00 26.00
BTG Civil 254.45 264.00 264.00 Total BTG 1365.45 1490.94 1490.94
8.3.4.6 However, upto COD CSPGCL submitted that actual cash
expenditure towards BTG including plant and equipment and
civil work at Rs. 1291.97 crore. In addition, CSPGCL also
submitted the un-discharged liability of Rs. 198.97 crore.
Break up of cost consider for this order is tabulated below:
Actual cash expenditure upto COD 1291.97
Un-discharged liability & provision after COD 198.97
Total BTG 1490.94
8.3.4.7 Thus, the Commission approves the actual cash expenditure
upto the COD as Rs. 1291.97 crore and allows Rs. 198.97
crore for meeting the un-discharged liability to be capitalized
within cut off period on actual basis after prudence check.
8.4 Balance of Plant (BOP):
8.4.1 CSPGCL submits that BOP contract consist of two parts one
includes Design, Engineering, Manufacturing Shop Fabrication,
Assembly, Inspection and Testing at supplier’s/sub-contractor’s
works, packing, forwarding to site all equipment/ BOP. As per
Page 52 of 77
Contract, the prices shall be adjusted in accordance with the
conditions of contract related to PV formula. Further, the PV
formula had a ceiling of 15% for supply during the contract
period. The other part included Civil works, structural steel
fabrication and erection, architectural and other building works,
roads and drains etc. ( including supply of steel, cement and
other construction materials) complete taxes and duties,
transportation, insurance, installation, testing & commissioning,
guarantee tests for complete BOP. As per Contract, the prices
shall be adjusted in accordance with the conditions of contract
related to PV formula. The PV formula had a ceiling of 15% for
civil works but without ceiling for erection during contract
period. Further, the price of the said award of works related to
BOP was considered as Rs. 993 crore, the revised estimated
cost pertaining to the BOP amounts to Rs. 1,132 crore. Thus,
the revised estimated increase in the cost amounts to 14%
which is within the ceiling of 15% prescribed as submitted by
the petitioner.
Commission’s view
8.4.2 The BOP work was awarded to Techpro Systems Ltd. As per the
LOI, the Techpro System Ltd. has to complete the scope of work
within 30 months from the zero date i.e. 10/12/2009 and in
case contractor fails to achieve the target date, the liquidated
damage clause had to be made applicable.
8.4.3 The CSPGCL’s submission shows that total increase in contract
value is by 14%, which is well within the limit of 15% price
variation cap as stipulated in LOI.
8.4.4 The applicable liquidated damage has been detailed in
subsequent section of this order.
Page 53 of 77
The total BOP consider in this order are as follow:
Rs. In crore
S.no Description As per order
Revised amount
Estimated Cost
1.a BOP equipment including taxes and duties
Indigenous 543.50
654.77 654.77 CIF
30.00
1.b Inland transportation including insurance for BOP equipment
7.00 7.00 7.00
1 Total BOP equipment 580.50 661.77 661.77
2.a BTG service (civil) 376.50 470.25 470.25 2.b BTG service transportation
including erection 36.00
2 Total BOP service 412.50 470.25 470.25
Total BOP (1+2) 993.00 1132.02 1132.02
However, upto COD CSPGCL submitted that actual cash
expenditure towards BOP is at Rs. 802.86 crore. In addition,
CSPGCL also submitted the un-discharged liability of Rs.
343.16 crore. Break up of cash expenditure made against BoP
and provisions made are as follow:
(Rs. in Crore)
Actual cash expenditure upto COD 802.86
Un-discharged liability & provision after COD 343.16
Total BOP 1132.02
8.4.5 Thus,the Commission approves the actual cash expenditure
upto the COD at Rs. 802.86 crore and allow Rs. 343.16 crore for
meeting the un-discharged liability to be capitalized within cut-
off period on actual basis after prudence check.
Page 54 of 77
8.5 Cost due to Change of Scope:
8.5.1 Petitioner submits that during finalisation of arrangement of coal
transportation arrangement, SECL has changed the loading
point. Accordingly, the external CHP scope has extended. The
change in scope has resulted in increase in estimated cost by
about Rs 14 Cr. Such changes during project execution are
inevitable. As, this change was triggered because of the decision
of SECL and not the CSPGCL, hence it was uncontrollable.
8.5.2 Petitioner further submitted during the TVS that the Korba West
Project has been given coal linkage from Kusmunda Mines of
SECL as the life of the existing coal supply bunker is nearing its
end SECL plan to construct new coal supply bunker. As per the
latest available information SECL has already invited tender and
likely to award contract for construction of bunker in April 2015
and the same is expected to be complete in FY 2017-18 only
once the construction of bunker at SECL end is completed,
CSPGCL will have to connect its LDCC conveyer system to the
new bunker. CSPGCL further submits that provision of Rs. 14
crore of expenses had already been made for such inter
connection in its revised cost estimation of Rs. 3,696.18 crore.
It is further submitted that cut-off date for this project may
kindly be relaxed from 31/03/2016 to 31/03/2018. CSPGCL
submitted that it shall not make any claim for additional CAPEX
beyond the already submitted revised capital cost with this
petition. It is further submitted that the extended capitalization
shall be beneficial for end users consumer too as the actual
tariff will be lower than earlier estimate explained in elsewhere
in this petition.
Page 55 of 77
Commission’s view
8.5.3 It is observed that the total cost towards connection of LDCC
conveyer system from existing to the new bunker will be
capable of catering coal to both power plants Korba West (Ext)
as well as HTPS and the cost towards this amounts to Rs. 14
core. In view of this it appears proper to allow this cost on the
basis of capacity (in MW) of both the plant proportionately.
Accordingly, 40% will be allocated to Korba West (Ext).
8.5.4 The submissions made by the petitioner shows that this task of
LDCC installation and commissioning may not be completed till
the cut-off date i.e 31/03/2016. From the submission of utility it
appears that this work is beyond the control of CSPGCL and
hence leave is granted for capitalization beyond the cut-off date.
8.5.5 Therefore, the total expenses of Rs. 14 crore as estimated by
CSGPCL towards change of loading point has been considered.
At this point, Commission is of the view to allow Rs. 14 crore or
the actual expenditure whichever is less. Out of total
expenditure, 40% of the expenditure shall be capitalized for
Korba West TPP and balance shall be capitalized in HTPS.
Accordingly for capital expenditure of Korba West 40% of Rs. 14
crore which corresponds to Rs. 5.6 crore has been considered.
8.6 Taxes and Duties:
8.6.1 The Petitioner submits that the contract price for BTG (supply,
erection & civil), was excluding taxes and duties and as per the
contract terms are , payable extra as actuals, for which about
Rs. 167 crore is considered in the revised estimate as against
the original estimate of Rs. 175 crore.
Page 56 of 77
Commission’s view
8.6.2 Taxes and duties are beyond the control of the petitioner. In
view of this revised estimates submitted by the CSPGCL has
been permitted.
Total taxes and duty consider in this order:-
Rs. in crore
Particular As per Approved Business plan
Estimated Cost
Taxes and duties 175.00 166.80
CSPGCL submission shows that actual cash expenditure
towards taxes and duties upto COD is Rs. 149.52 crore. In
addition, un-discharged liability of Rs. 17.28 crore is also likely
to be incurred. Break up of approved taxes and duties paid and
provisions made are as follow:
Actual cash expenditure upto COD 149.52
Un-discharged liability & provision after COD 17.28
Total Taxes and duties 166.80
8.7 Start-up Fuel as Working Capital Margin:
8.7.1 CSPGCL submitted that the working capital margin was
tentatively estimated at Rs. 35 crore. With the rise in coal
and oil cost, the actual net working capital margin incurred
was Rs. 68.63 crore (net of fuel cost incurred Rs. 84.84 crore
and revenue from sale of infirm power Rs. 16.22 crore). It is
also submitted that the pre-operative expenses of Rs. 35 crore
in the business plan was just a notional estimation. However, in
real scenario in the pre-operative period numerous trial-run are
needed for testing and commissioning of individual equipment.
It is also noted that considerable cost escalation in fuel price
leads to increase in the pre-operative expenses. However, the
Page 57 of 77
rate of sale of infirm power remain constant at the rate of Rs. 1
per unit as per the order of the Commission.
8.7.2 CSPGCL also submits that in the Statement of Reasons of
CSERC (MYT Regulations, 2012) has clearly established the
methodology of treatment of actual fuel cost incurred before
COD and actual revenue earned from infirm power. Accordingly
requested to consider the difference of the actual fuel cost
incurred and actual revenue earned for sale of infirm power i.e.,
Rs. 68.63 crore for the purpose of capital cost.
Commission’s view
8.7.3 The petitioner was directed to submit the month wise volume of
unit generated before COD and also the month wise fuel
consumption. The data submitted by CSPGCL for period upto
the COD of project is as under:-
Month Net generation
(in MU)
Billed amount
(Rs. In crore)
Apr’13 1.59 0.159
May’13 8.87 0.887
Jun’13 49.15 4.915
Jul’13 -- --
Aug’13 69.57 6.957
Sep’13 upto 04/09/13 33.01 3.301
Total 162.18 16.218
Page 58 of 77
Detail of month-wise fuel consumption
Month Coal consumption HFO HSD
MT Rs. KL Rs. KL Rs.
Apr’13 10278 0.98 -- -- 1351.71 8.66
May’13 13059 1.15 -- -- 1359.54 8.71
Jun’13 44350 4.15 -- -- 2038.91 13.06
Jul’13 -- -- -- -- -- --
Aug’13 60681 6.00 713.20 3.63 2538.62 16.26
Sep’13 upto 04/09/13
25495 2.56 60.20 0.31 66.78 0.43
Total 153863 14.78 773.40 3.94 10324.31 66.13
8.7.4 Considering the facts and data submitted, the total expenditure
towards start up fuel consumption is Rs. 84.8507 crore whereas
revenue earned from sale of infirm power is Rs.16.218 crore.
Thus the net expenditure upto COD of Rs. 68.63 crore is allowed
to capitalize.
Sl. No. Particulars Amount in Rs. Crores up to COD
1. Cost of coal consumed 14.78
2. Cost of HFO consumed 3.94
3. Cost of HSD consumed 66.13
Sub total 84.85
4. Less: Cost of power sold @ Rs. 1/unit for 162.18 MU
16.218
5. Total cost to be capitalized 68.63
8.8 Overheads including Contingency and Other Miscellaneous
Expenses:
8.8.1 CSPGCL submits that these charges pertain to expenses
incurred by it towards employee working in the project site,
Administrative & General (A&G), costs of training, project
Page 59 of 77
consultancies, cost of construction of residential quarters and
other miscellaneous expenses of similar nature, which have
been capitalised on actual basis. It also includes provision for
contingencies, which invariably occur during such long gestation
capital intensive infrastructure projects. The revised aggregate
estimated value under these heads is 121 Cr against the original
estimate of 134 crore.
8.8.2 CSPGCL further state that out of the above Rs. 121 crore, the
major subheads are:-
overheads (Employee, A&G, legal, water charges etc)
58 crore
Project consultancies 9 crore
Residential quarters 16 crore
Miscellaneous (plantations, overflow arrangement of ash water etc.)
1 crore
Contingencies 37 crore
Total 121 crore
8.8.3 CSPGCL submitted that overheads per-se amounts to lower than
3% of the revised estimated hard cost. Similarly, the
consultancy expenses are much less than 0.5% of project cost.
Further, as the cut-off period is 31 March, 2016 as per CSERC
(MYT Regulations, 2012) and the completion of the project
additional capital expenditure is also envisaged by that date,
therefore the Petitioner might have to incur some expenses/
variations which are not envisaged at present. In view of this,
contingency amounting to Rs. 37 crore has been envisaged. It is
important to note that once the project is completed and in case
there is no further unforeseen expenses, the contingency would
be wiped off.
Page 60 of 77
Commission's view
8.8.4 According to the approved business plan, the overhead
expenses was estimated to the tune of Rs. 134 crore. The
breakup of cost as submitted by CSPGCL is as under:-
Rs. in crore
S. No.
Particular As per business
plan
Actual as on
COD
Provision after
COD
Estimated Cost
1. Establishment including residential quarter
74.21 72.79 3.19 75.98
2. Design & engineering
7.98 7.59 1.05 8.64
3. Contingency 51.81 -- 36.71 36.71
134.00 80.38 40.95 121.33
8.8.5 The actual cash expenditure incurred upto the date of COD is
Rs. 80.38 crore is hereby approved. However for provisions of
expenditure after COD, CSPGCL is directed that the actual
expenditure incurred after cutoff date should be submitted for
final approval of capital cost.
Actual cash expenditure upto COD 80.38
Provision after COD 4.24
Total overhead, contingency and other misc. expenses
84.62
8.8.6 Based on the above, the total cost excluding IDC considered and
approved upto COD by Commission is summarized as under:-
Page 61 of 77
S. No. Detail of Capital Cost
As per
Business
plan
08/2010
Actual
cash
expendit
ure as on COD
Liabiliti
es/Pro
vision
after COD
Total
1 2 3 4 5 = 3+4
1.1 Land with R&R 24.19 17.54 0.43 17.97
1.2 Preliminary Investigation and Site
development 33.00 21.83 1.20 23.03
1 Total Land Cost 57.19 39.37 1.63 41.00
2.1.1.1 BTG Equipment 942.00 1007.94
2.1.1.2 BTG Tansportation 26.00 26.00
2.1.1.3 BTG Installation 143.00 193.00
2.1.1.4 BTG Civil (including Taxes) 254.45 264.00
2.1.1 BTG 1,365.45 1,291.97 198.97 1,490.94
2.1.2.1.1 BOP Equipment (indigenous) 543.50 484.95 169.82 654.77
2.1.2.1.2 BOP Equipment (CIF) 30.00
2.1.2.1.3 BOP Equipment
(Transportation) 7.00 5.72 1.28 7.00
2.1.2.1.4 BOP Equipment (Ext. CHP) 5.60 5.60
2.1.2.1 BOP Equipment 580.50 490.67 176.70 667.37
2.1.2.2.1 BOP Services (Supply) 376.50 312.19 158.06 470.25
2.1.2.2.2 BOP Services (Transportation) 36.00
2.1.2.2 BOP Services 412.50 312.19 158.06 470.25
2.1.2 BOP 993.00 802.86 334.76 1,137.62
2.1 Total Plant & Equipment including Civil work
2,358.45 2,094.83 533.73 2,628.56
2.2 Taxes & Duties 175.00 149.52 17.28 166.80
2 Total Plant & Machinery including Taxes & Duties
2,533.45 2,244.35 551.01 2,795.36
3 Start up Fuel 35.00 68.63 0.00 68.63
4.1 Establishment including residential
Quarter 74.21 72.79 3.19 75.98
4.2 Design & Engineering 7.98 7.59 1.05 8.64
4.3 Contingency 51.81 0.00 0.00 0.00
4 Total Overhead 134.00 80.38 4.24 84.62
Total Capital Cost (excluding
IDC) 2,759.64 2,432.73 556.88 2989.61
Page 62 of 77
8.9 Interest during Construction (IDC):
8.9.1 CSPGCL submitted that in the Business Plan petition 08 of 2010,
IDC has been considered on a notional basis, which deserves
review in a realistic manner as normally considered for project
financing purposes.
8.9.2 CSPGCL submitted that increase in IDC is attributable to the
change in interest rates & change in loan amount. At the time
of earlier estimates, the interest rate was assumed as 11%,
however with inflationary pressures in economy, rates increased
in the range of 11.5% to 13%. CSPGCL further submitted that,
PVC has increased the project cost, hence, forced to draw the
loan higher than the earlier anticipated value. Thus, increase in
IDC is the consequential effect of the above factors which were
beyond control of CSPGCL.
8.9.3 CSPGCL submitted that Rs. 705.68 crore was capitalised
towards IDC after getting rebate of 2% amounted to Rs. 14.39
crore.
Commission’s view
8.9.4 CSPGCL was directed to submit the loan agreement executed
with PFC. In response to this, CSPGCL has submitted a copy of
loan agreement. The document on record reveals that loan
amount has been enhanced from Rs. 2,078.00 crore to Rs.
2,840.22 crore and thereafter the loan amount was further
revised to 3,369.98 crore. The project cost has been financed
on the basis of debt: equity ratio of 90:10.
Page 63 of 77
8.9.5 CSPGCL submission on loan drawal is tabulated as under:-
FY Date/Quarter Loan drawal
proposed in
the Business
Plan
Actual Loan drawl
as submitted
2008-09 69.16 2009-10 Q-I 26.11
Q-II 52.83
Q-III 204.99
Q-IV 206.67
Total 453.07 490.60 2010-11 Q-I 82.50
Q-II 109.45
Q-III 203.48
Q-IV 232.75
Total 905.51 628.17 2011-12 Q-I 141.61
Q-II 204.49
Q-III 194.38
Q-IV 335.80
Total 1058.09 876.28 2012-13 Q-I 65.55
Q-II 0.00
Q-III 0.00
Q-IV 243.36
Total 420.00 308.91 2013-14 Q-I 122.30
Q-II (upto COD) 153.82
Total 0.00 276.12
Loan drawl up-to COD 2,649.26
Loan to be drawl after COD 679.92
Total Debt 2,836.68 3,329.18
Equity 319.63 367.00
Project Cost excluding initial
spares
3,156.31 3,696.18
8.9.6 According to approved business plan (petition no. 08 of 2010),
commissioning of project was scheduled in June 2012. However,
the actual commissioning was achieved on 22nd March 2013 and
COD was achieved on 5th September 2013. Hence,there is total
delay of total 8 months and 21 days. CEA’s report on thermal
Page 64 of 77
projects report on country published on 26th March 2015 also
indicates that CSPGCL has reorted the same to CEA.
8.9.7 CSPGCL submitted that the delay in execution of the project
was solely out of its control. CSPGCL further submitted that the
COD was achieved within stipulated time. However, Commission
while going through the CERC Regulation namely Grant of
Connectivity (second amendment), Regulation 2012 it is noted
that amendment 8 of Principal Regulation stipulated as:-
“Notwithstanding anything contained in clause (6) of this
Regulation and any provision with regard to sale of infirm
power in the PPA, a unit of a generating station including a
captive generating plant which has been granted
connectivity to the grid shall be allowed to inject infirm
power into the grid during testing including full load testing
before its COD for a period not exceeding six months from
the date of first synchronization after obtaining prior
permission of the concerned Regional Load Despatch
Centre:”
Considering the Regulations notified by CERC, the COD
should have been achieved before December 2012 against
the actual COD achieved on 5th September 2013.
8.9.8 It is observed that all other costs except IDC are within the
variations of maximum ceiling of 15%. However the major
reason of increase in cost of capital is basically due to IDC.
Further it is being observed that the delay in project execution
has put a considerable impact on IDC. Hence before taking a
decision on amount of IDC, it appears proper, to examine the
reason for delay in detail.
Page 65 of 77
8.9.9 Before entering into any deliberation on the reasons for delay it
is deemed fit that the first the factual matrix regarding due date
of COD is laid down clearly.
8.9.10 The capital investment of the project was approved by the
Commission after due proceedings vide the order dated
01/06/2010. As per the said order, commissioning of the project
was scheduled in June 2012. The synchronization with grid has
taken place on 18th March 2013 and the commissioning of the
project was achieved on 22nd March 2013. The same
commissioning date has been reported to CEA also. As per
IEGC, under normal circumstances, COD has to be achieved
within six months form synchronization. The actual COD was
attained on 5th September 2013. Thus it is observed that time
between synchronization to COD is less than 6 months and
there is no delay in considering time span from commissioning
to COD.
8.9.11 The time gap between the “scheduled commissioning” as
approved in the Business plan order 01.10.2010 and actual
Commissioning is the period from 30th June 2012 (42 months
from order to BHEL for civil works) to 22nd March 2013. Thus
the delay is computed to be 265 days (approximately 9
months).
8.9.12 In reference to issues raised during TVS and the reply to
objections raised during hearing, CSPGCL has submitted that
the delay was not on account of factors attributable to it and
has pleaded for allowing the same. Per contra, the objectors
have pleaded that the entire cost of delay should be borne by
the utility. In view of the rival contentions, the Commission has
deliberated the issue in detail.
Page 66 of 77
8.9.13 CSPGCL in its detailed submissions submitted that though detail
analysis is usually taken at the time of contract closure,
however, prima-facia the delay can be attributed to two main
factors. One pertains to the delay in placement of order for
chimney and the other relates to the problems faced in land
acquisition for ash pipeline and ash dyke.
8.9.14 Documents submitted by CSPGCL reveals that the chimney work
was awarded to BHEL on cost plus basis. BHEL floated a tender
and based on the past credentials and experience, M/s GDCL
amongst other bidders full filled the laid down criterions and
after commercial bid opening it was selected by BHEL as the L -
1 Bidder. CSPGCL also consented for the same on 16th Sept
2009. Meanwhile on 23rd September 2009, the chimney under
construction at nearby BALCO powerhouse collapsed. As the
agency executing the chimney works of BALCO was also M/s
GDCL, as a precautionary measure, CSPGCL withdrew its
approval of work order of M/s GDCL and asked BHEL to award
work to some other qualified agency. As per CSPGCL
submission, M/s BHEL was also advised to ensure that all
measures to ensure safety must be taken. The documents
submitted indicates that BHEL went for retendering in October
2009 and after completion of due process, finally the order for
chimney construction was placed on M/s Parasad & Co. on 04th
March 2010.
8.9.15 From analysis of sequence of events it is noted that the BALCO
chimney accident was a fatal accident in the history of Indian
Power Sector in which many lifes were lost. Implications of such
a major accident and that too in nearby area cannot be ignored
or overlooked.
Page 67 of 77
8.9.16 The reports available on records indicates that though in the
initial stages M/s BALCO management attributed the whole
accident to lightening, soon after, reports surfaced it appeared
that the accidents was not a result of ‘Act of God’ rather it was a
manmade disaster.
8.9.17 NIT, Raipur in its investigation and various reports available in
this regard have shown doubts on faulty design, substandard
material and poor workmanship.
8.9.18 The judicial committee appointed by Government of
Chhattisgarh (Sandeep Bakshi Committee), in its report tabled
on the floor of Legislative assembly has also indicated M/s GDCL
(amongst others) responsible for this severe mishap.
8.9.19 In such a scenario, CSPGCL’s decision in barring award of work
to M/s GDCL which was the agency carrying out the construction
work at nearby BALCO site appears correct. Approximate 15
days time was taken to firm up such decision (23nd September
2009 i.e date of accident to 9th October 2009 i.e date of written
communication to BHEL) also indicate that the decision was not
a panic reaction but was a deliberated and thoughtful decision in
the prevailing circumstances at that time.
8.9.20 BHEL carried t out the retendering process. Again, looking to
the time required for review of scope and specifications which
would have been required in the aftermath of BALCO accident
and the procedural part for such tenders, approximately five
months time do not appear inordinate delay.
8.9.21 In view of the above, the time period from 16th September 2009
i.e. the date of consent for award of work to M/s GDCL and 4th
March 2010 i.e. the date of award of work of chimney to the
other agency, (about 169 days) qualifies as the delay
Page 68 of 77
attributable to uncontrollable factors. As detailed in the
subsequent para also, it is made clear that any LD on account of
delay in supply / construction of chimey will be pass though to
the beneficiary.
8.9.22 The second prime reason for project delay has been attributed
to the land acquisition issues. There is no denial that land
acquisition has become a big issue for all infrastructure projects.
It is also true that the issue is no more a pure administrative
and legal issue. It has far bigger factors, some of which fall
beyond the competence and purview of a project developer. But
at the same time it is also true that sensitivity of land issue is
not an overnight development and project developers are
expected to exercise due diligence and prepare pro-active
strategies to mitigate such threats. It cannot be termed totally
uncontrollable factor, particularly for a project like Korba West
TPP where the land acquisition needed was comparatively much
lower and as there was enough time available (from start date)
for laying of ash pipe line and construction of ash dyke, it would
be unfair to burden the consumer with 100% cost of delay.
8.9.23 It may be purposeful to mention a Judgment in Appeal No. 72
of 2010 of Hon’ble ATE which reads as under:
“7.4. The delay in execution of a generating project could
occur due to following reasons:
i) due to factors entirely attributable to the generating
company, e.g., imprudence in selecting the
contractors/suppliers and in executing contractual
agreements including terms and conditions of the contracts,
delay in award of contracts, delay in providing inputs like
making land available to the contractors, delay in payments
to contractors/suppliers as per the terms of contract,
Page 69 of 77
mismanagement of finances, slackness in project
management like improper co-ordination between the
various contractors, etc.
ii) due to factors beyond the control of the
generating company e.g. delay caused due to force majeure
like natural calamity or any other reasons which clearly
establish, beyond any doubt, that there has been no
imprudence on the part of the generating company in
executing the project.
iii) situation not covered by (i) & (ii) above.
In our opinion in the first case the entire cost due to time
over run has to be borne by the generating company.
However, the Liquidated Damages (LDs) and insurance
proceeds on account of delay, if any, received by the
generating company could be retained by the generating
company. In the second case the generating company could
be given benefit of the additional cost incurred due to time
over- run. However, the consumers should get full benefit
of the LDs recovered from the contractors/suppliers of the
generating company and the insurance proceeds, if any, to
reduce the capital cost. In the third case the additional cost
due to time overrun including the LDs and insurance
proceeds could be shared between the generating company
and the consumer. It would also be prudent to consider the
delay with respect to some benchmarks rather than
depending on the provisions of the contract between the
generating company and its contractors/suppliers. If the
time schedule is taken as per the terms of the contract, this
may result in imprudent time schedule not in accordance
with good industry practices.”
“8.6 ....
Page 70 of 77
We agree with the State Commission that the infusion of
debt & equity has to be more or less on pari passu basis as
per normative debt equity ratio. However, the increase in
IDC due to time over run has to be allowed only according
to the principles laid down in para 7.4 above. Accordingly,
the State Commission is directed to re-determine the IDC
for the actual period of commissioning of the project and
then work out the excess IDC for the period of time over
run on a prorata basis and limit the disallowance to 50% of
the same on account of excess IDC. This question is
answered accordingly.”
8.9.24 On the basis of above judgement of Hon’ble ATE ,the
Commission is of the view that extra IDC on account of the
delay (of about 96 days i.e total delay of 265 days minus delay
of 169 days on account of chimney) would be shared between
the generating company and the beneficiary. Accordingly the
cost has to be shared between the generating company and the
beneficiaries in ratio 50:50. In such a case, the extra IDC
needs to be computed considering the impact of the delay in
the commissioning of the project only (i.e. 96 days).
8.9.25 The Commission has recomputed IDC due to time over run of
96 days considering the approved cost of Rs. 2,432.73 crore
(which is exclusive of IDC) with Debt: Equity ratio of 90:10,
based on the actual loan drawal pattern of Rs. 2,649.26 crore
upto COD and actual interest rates submitted by CSPGCL.
Commission considers actual disbursement for re-computation of
IDC as base since the disbursement was made on actual bills
submitted to PFC for payment as loan.
Page 71 of 77
Assumptions for Computation of IDC
Particulars As per Petition Cost as on COD Project Cost (Rs. crore) 3,696.18 2432.73 Debt Equity ratio 90:10 90:10 Loan component (Rs. crore)
2649.26 2189.46
Draw down schedule Actual Actual Interest Rate Actual Actual
8.9.26 The Project cost including IDC approved by the Commission is
shown in the Table below:
IDC As submitted by Petitioner IDC re-calculated
Quarter Gross
Interest Rebate
Net
Interest
Gross
Interest Rebate
Net
Interest
April-09 0.53 0.01 0.52 0.46 0.01 0.45
July-09 2.54 0.05 2.48 2.24 0.04 2.19
October-09 3.81 0.08 3.73 3.42 0.07 3.35
January-10 6.23 0.13 6.10 5.65 0.11 5.53
April-10 14.39 0.31 14.09 12.96 0.26 12.70
July-10 17.85 0.38 17.46 16.36 0.33 16.03
October-10 21.21 0.46 20.76 19.81 0.40 19.41
January-11 25.21 0.55 24.66 24.22 0.48 23.73
April-11 30.39 0.66 29.72 29.40 0.59 28.82
July-11 36.33 0.79 35.54 35.49 0.71 34.78
October-11 42.84 0.92 41.92 42.32 0.85 41.47
January-12 49.67 1.06 48.62 49.71 0.99 48.72
April-12 56.89 1.19 55.69 57.40 1.15 56.25
July-12 69.45 1.31 68.14 70.63 1.41 69.22
October-12 70.36 1.33 69.03 73.71 1.47 72.24
January-13 71.13 1.34 69.79 76.10 1.52 74.57
April-13 72.13 1.36 70.77 79.07 1.58 77.49
July-13 81.04 1.54 79.50 75.40* 1.51 73.89
Upto 4.09.2013 48.08 0.91 47.17 -- -- --
Total 720.07 14.39 705.68 674.34 13.49 660.85
Note: * Considering IDC upto Jun 2013 only.
Page 72 of 77
8.9.27 The total interest during construction re-computed at Rs.
660.85 crore after considering 2% rebate allowed by PFC as per
the submission of CSPDCL. The balance of Rs. 44.83 crore i.e.
(705.68-660.85) to be share in ratio 50:50 between CSPGCL
and beneficiary as per Hon’ble ATE judgment. Hence total
amount of IDC allowed to capitalise in this order upto date of
COD is Rs. 683.27 crore i.e. (660.85 + 44.83/2).
8.9.28 CSPGCL had submitted that while issuing BOP contract to M/s
Tecpro, 10% interest bearing initial advance was given against
bank guarantee. CSPGCL has earned an interest income of Rs.
44.22 crore on such advance up to COD, thus the net IDC on
the net IDC to be capitalized till date of COD is considered at
Rs. 639.05 crore (i.e. 683.27-44.22).
8.9.29 The total final capital cost as approved by Commission in this
order is tabulated below:
(Rs. in crore)
Description
Approved
Cost as on COD
Cost
consider after COD
Estimated
Cost
Land including Re-settlement
39.37 1.63 41.00
BTG including Civil work
1291.97 198.97 1490.94
BOP 802.86 329.16 1132.02
Change in scope of work
-- 5.60 5.60
Taxes and Duties 149.52 17.28 166.80
Start-up Fuel as working capital Margin
68.63 -- 68.63
Overhead 80.38 4.24 84.62
IDC 639.05 -- 639.05
Total Project Cost 3071.78 556.88 3628.66
Page 73 of 77
8.10 Initial Spares:
8.10.1 CSPGCL submitted that as per Regulation 18.3 of CSERC MYT
Regulation 2012, in case of coal based thermal power stations,
initial spares to the tune of 2.5% of project cost are allowed. It
is further envisaged that 50% of the initial spares may be
capitalised by 31st March 2015 and the balance are expected to
be capitalised in FY 15-16.
Commission View:
8.10.2 Commission is of view that the initial spares shall be allowed as
per applicable Regulation. The CSERC (MYT Regulation, 2012)
stipulates that in case of coal base thermal power stations,
initial spares to be allowed to the tune of 2.5% of Rs. 3,628.66
crore i.e. Rs. 90.72 crore. This amount shall be further adjusted
after finalization of LD clause as per LOI due to delay in project
execution by contractors as narrated below.
8.11 Liquidated Damages
8.11.1 CSPGCL submitted that the orders contain Liquidated Damages
(LD) clause. CSPGCL submitted regarding actual LD imposition,
that as per provisions of the contract and as per standard
practice, the Liquidated Damages (LD) is finalized in affirmation
of a detailed procedure. Accordingly, leave is humbly craved for
submission of LD details as and when the same gets settled.
8.11.2 CSPGCL submitted that even after making all diligent
efforts within its purview, towards pursuing the contractor for
expeditious commissioning of the Unit, the Unit could not be
commissioned in the envisaged time frame.
Page 74 of 77
8.11.3 CSPGCL submitted that as per the Contract, in case the
Contractor fails to achieve the COD of the Unit within the
stipulated time period due to reasons attributable to him, it
shall levy LD on the contractor as per terms of LOI subject to
maximum 10% of the contract price with applicable price
variation. CSPGCL submitted that it had not levied any
Liquidated Damages against the contractors as contract shall
not be finalised and recovery shall be done on closing of the
Contract.
Commission’s Analysis
8.11.4 It is observed that CSPGCL has not yet levied Liquidated
Damages on the contracts as the contracts have not yet been
closed. The Commission therefore at this stage has not
considered the LD. The Commission directs the Petitioner to
submit a separate report regarding the actual amount of the LD
recovered from the contractors upon finalisation of the
contracts so that the same can be considered while approving
the final Capital Cost after finalisation of Contracts.
8.12 Means of Finance
8.12.1 CSPGCL submitted that the total cash expenditure as on COD is
Rs. 3,138.41 crore. CSPGCL submitted that it had tied up long
term debt of Rs. 3,369.98 crore from Power Finance
Corporation (PFC). CSPGCL submitted that out of the total
sanctioned loan of Rs. 3,369.98 crore, loan amount of Rs.
2,649.26 crore was drawn till COD. CSPGCL submitted that
there was a liability/ provision of Rs. 601.99 crore (including
the retention amount) as on COD. CSPGCL submitted that
GoCG has provided an equity contribution of Rs. 367 crore
invested through CSPHCL at Debt: Equity Ratio of 90:10.
Page 75 of 77
Commission View:
8.12.2 Based on analysis and observations mentioned above, the
estimated project cost considered in this petition is as below:
Rs. in crore
Description As per
petition
Approved
Cost on COD
Un-
discharged Liabilities
Estimated
Cost
Land including Re-settlement
41.00 39.37 1.63 41.00
BTG including BTG Civil 1490.94 1291.97 198.97 1490.94 BOP 1132.02 802.86 329.16 1132.02 Change of Scope of work 14.00 -- 5.60 5.60 Taxes and Duties 166.80 149.52 17.28 166.80 Start-up fuel as Working Capital Margin
68.63 68.63 -- 68.63
Overhead 121.34 80.38 4.24 84.62 IDC 661.46 639.05 -- 639.05 Capital Cost
(excluding initial spares)
3696.18 3071.78 556.88 3628.66
Initial Spares 92.40 -- 90.72 90.72 Total Cost (including initial spares)
3788.59 3071.78 647.60 3719.37
Hence, considering the financing at Debt:Equity ratio of 90:10
the loan portion worked out for total project at Rs. 3,347.43 and
balance to be treated as equity.
9. Summary of our findings:
Conclusion as per our observation in relevant paras of above
order are as under:
1. Land cost including preliminary and enabling expenses is
approved as Rs. 39.37 crore.
2. BTG including BTG Civil is approved as Rs. 1291.97 crore.
3. BOP is approved as Rs. 802.86 crore.
4. Taxes and duties are approved as Rs. 149.52 crore.
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5. Start-up fuel as working capital margin is approved as Rs.
68.63 crore.
6. Overhead is approved as Rs. 80.38 crore.
7. IDC is approved as Rs. 639.05 crore.
8. Total capital cost approved as on COD is Rs. 3071.78 crore.
Sd/-
(Vinod Shrivastava) MEMBER
Sd/-
(Narayan Singh) CHAIRMAN
Page 77 of 77
Annexure – I
List of persons who presented during Hearing on 31st March 2015
S. No. Name of the person
1 Shri Satyanarayan Sharmaji (MLA)
2 Shri M.S. Ratnam
3 Er. Shyam Kabra
4 Shri Foruque Masood
5 Shri Raza Ahmed
6 Shri A.K. Saxena
7 Shri B.R. Chandrakar
8 Shri Rajkumar Gupta
9 Shri Purushotam
10 Shri Gaindlal Patel
11 Shri Santu Lal
12 Shri Prasann Taunk
13 Shri I.K. Verma
14 Shri Krishana Dewangan
15 Shri Kewal Verma
16 Shri Gyandas
17 Shri R.A. Verma
18 Shri A.K. Saxena
19 Shri Santosh Singh
20 Shri M.S. Chauhan
21 Shri O.P. Ojha
22 Shri M.R. Bagade
23 Shri H.K. Shridhar
24 Shri S. Dubey
25 Shri S.K. Thawait
26 Shri S.K. Tiwari
27 Shri Vinay Kumar Pandey
28 Shri Sandeep Shukla
29 Shri Vivek Sen