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CAG needs to CLEAN UP muddy hydropower projects

September 03, 2012 14:43 IST

The CAG's audit of hydropower projects seems to be an effort for status quo that does not do justice to the formidable reputation it has attracted through some of its exemplary work

The Comptroller and Auditor General issued a press release on August 31 for its 'Performance Audit Report No 10 of 2012-13' of hydropower projects for the 11th five-year plan ending on March 31. This CAG audit is an extremely weak and inadequate work of the CAG.

In fact, it does not really audit the performance of hydropower projects at all. The audit fails to raise many of the fundamental issues related to hydropower projects. It does not draw strong enough conclusions that are warranted based on its audit. Its recommendations are even weaker and do not address the issues raised in the conclusions. It seems like more of business as usual -- an effort for status quo that does not do justice to the formidable reputation the CAG has attracted through some of its exemplary work over the years and recent past.

Firstly, the audit is not much of a performance audit of hydropower projects or hydropower companies. The basic purpose of hydropower projects is generation of electricity at stipulated annual, seasonal, daily and peaking hours. However, the CAG performance audit has not gone into this question at all at any stage. If it had gone into this, it would have found that 89 per cent of India's operating hydropower projects generate at below the sanctioned rates and half of them generate below 50 per cent of design rate.

It would have also realised that over the last two decades, generation of electricity per MW installed capacity has reduced by a huge 20 per cent. The CAG would have also found out that no one is assessing how much of the power generation from hydro projects is during peak hours when generation of peaking power is supposed to be the USP (Unique Selling Proposition) of these projects.

Both storage-based and so-called run of the river hydro projects involve huge social and environmental costs, apart from deforestation and displacement of people. They are justified on the ground that they meet the peak time demand for electricity. A performance audit that does not address these aspects is not only incomplete but also misleading.
One of the fundamental issues CAG has refrained from looking at is the social, economic, environmental, cultural, religious and other services a free flowing river provides to a large cross-section of the society and how these services are destroyed when a hydropower project is built.

Rivers are functioning service providers, unlike the case of bandwidth (2G licenses) and coal in the mines, issues on which CAG has rightly shown great concern recently. It is inexplicable as to why the CAG has refrained from considering this issue while assessing the efficacy of performance of hydropower projects.
Thirdly, it is welcome that the CAG has noted that there has been lack of "due diligence" and proper "survey and investigation" before taking up the projects. However, the CAG has not held agencies like Central Electricity Authority responsible for giving concurrence to the projects under the Electricity Act without ensuring that the projects have done full and proper appraisal.

For example, CAG has found in its audit that geological surprises have been one of the reasons for delays, and that the companies have not been doing necessary testing. But these are the issues that the CEA is supposed to look into in collaboration with the Central Water Commission and the Geological Survey of India.

It is clear from the audit that the CEA has been routinely giving concurrences to the projects without ensuring that full appraisal and due diligence has been done and without any transparency or independent members on its panel. CAG should have held the CEA, CWC and GSI responsible for such flawed concurrences and should have raised fundamental issues about the process followed by the CEA before giving concurrences.

Similarly the CAG should have raised questions about the fundamentally flawed process of environment impact appraisal followed by the Union ministry of environment and forests and the MEF's the Expert Appraisal Committee on river valley projects, but it has refrained from raising them. Why the CAG has refrained from reaching such conclusions logically implied by its audit is surprising.
Fourthly, the CAG should also audit the process of allocation of hydropower projects to private developers. The CAG has rightly raised the issue of competitive bidding in case of bandwidth (2G) and coal recently while allocating these "natural" resources to private developers, but for some unknown reason, has refrained from scrutinising the process of allocation of rivers to private developers for developing hydropower projects, which the private developers are using for their profiteering.

The rivers are society's resources and are its biggest natural resource, and it is high time all concerned, including CAG, look into these issues. Similarly, why is the CAG not auditing the accounts of private hydropower developers, when these developers are using these national natural public resources?
Fifthly, the CAG audit in question has very rightly raised the issue of the failure of monitoring mechanisms and how conflict of interests prevail in the functioning of hydropower projects, with even a former power secretary (P Abraham) simultaneously being on the government committee probing a hydropower project and also on the board of the company involved in the specific contract being probed.

These issues prevail because there is absolute lack of transparency and lack of presence of independent credible members monitoring the functioning of these projects and companies.

Unfortunately, the CAG has not found it necessary to make such recommendations even though they are clearly warranted from its own audit.
Lastly, the CAG's recommendations are peripheral and pedestrian. They have not addressed the systemic and institutional issues that are at the root of the problems covered in the audit, however weak it may be. These issues revolve around the professional capabilities, transparent and independent functioning of the CEA, the role of MoEF and its EAC, the need to ensure that the composition of EAC and other monitoring and other committees are such that its members have no conflict of interest in appraising projects and how a few influential power developers have been able to corner most of the projects as a result of the non-transparent award procedures adopted. What are the proposals to change the situation in any fundamental way? There are none.
We are therefore forced to reach the unfortunate conclusion that this CAG audit is highly inadequate, misleading and devoid of any attention to the basic issues. We would urge CAG to urgently look into the issues raised and redo the audit, keeping these issues in mind.

Himanshu Thakkar, South Asia Network on Dams, Rivers & People
E A S Sarma, former secretary to govt of India
Bharat Jhunjhunwala, former professor, IIM Bangalore
Ravindranath, Rural volunteers Centre, Dist Dhemaji, Assam
Malika Virdi, Himal Prakriti, Munsiari, Uttarakhand
E Theophilus, Himal Prakriti, Munsiari, Uttarakhand
K Ramnarayan, Coordinator , Save The Rivers Campaign, Uttarakhand
Samir Mehta, International Rivers, Mumbai
Shripad Dharmadhikary, Manthan Adhyayan Kendra, Pune
Dr Latha Anantha, River Research Centre, Thrissur, Kerala