Government of India Ministry of Power NOTE FOR CONSIDERATION OF PUBLIC INVESTMENT BOARD (PIB) ON 1ST REVISED COST (AT JULY 2010 PRICE LEVEL) OF CHUTAK HYDRO-ELECTRIC PROJECT (44 MW), JAMMU & KASHMIR
EXECUTED BY NHPC LIMITED
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NOTE FOR CONSIDERATION OF PUBLIC INVESTMENT BOARD (PIB) ON 1ST REVISED COST (AT JULY 2010 PRICE LEVEL) OF CHUTAK HYDRO-ELECTRIC PROJECT (44 MW), JAMMU & KASHMIR
INDEX Point No
Item Details
Page No.
1
Project Identification
1
2
Project Category
2
3
Project Objectives and Targets
2-3
4
RCE Details
3-7
5
Plan Provision & Funding
7-9
6
Approvals Required
9
LIST OF ANNEXURES
Annexure A
Details of Contingent Liabilities
1-4
Annexure B
Standing Committee Report on Cost and Time Overrun
1-19
2
EXECUTIVE SUMMARY OF TIME & COST OVERRUN OF
CHUTAK H.E. PROJECT, (44 MW), J&K 1.0
BACKGROUND Chutak H.E. Project is a run of river scheme located on river Suru in Kargil district, of Jammu and Kashmir. GOI accorded Sanction for execution of the project at a cost of Rs.621.26 crore at December 2005 price level. The scheduled date of completion of the Project was 23.02.2011.The project was completed on 01.02.2013 & has been under commercial operation since then. The RCE worked out to Rs. 893.76 crore at July 2010 P.L.
2.0
COST & TIME OVERRUN The project has incurred a cost overrun of Rs 272.50 crore and a time overrun of 24 months.
3.0
Observations of Standing Committee on Time & Cost Overrun The Standing Committee meetings were held on 05.06.2013 , 12.06.2013 ,18.11.2013 27.02.2014 , & 28.04.2014 to examine the reasons for time and cost overrun and fixing the responsibility, if any. The Standing Committee examined the relevant data and information made available to them and have come to conclusion that factors for cost and time overrun were beyond the control of NHPC and no one can be held responsible. Accordingly, Standing Committee in it’s report dated 13.05.2014 annexed with PIB Memo as Annex-B has recommended the cost overrun of Rs 272.50 crore & time overrun of 24 months.
4.0
Proposed Funding Pattern The funding pattern of the originally approved cost was on the basis of Debt:Equity ration 70:30 at the level of originally approved cost of Rs 612.26 crore , the debt component consisting of Rs 364.00 crore of Subordinate loan and Rs 70.88 crore of commercial loan . The balance cost was to be met by Equity/IR from NHPC amounting to Rs 186.38 crore. At the RCE of Rs 893.76 crore ,the proposed funding pattern will comprise of Subordinate Debt of Rs 554.75 crores (Increase of Rs 190.75 crores) , commercial loans of Rs 70.88 crore (No change from Original pattern of funding) and Equity of Rs 268.13 crore (Increase of Rs 81.75 crores).Thus the overrun in cost of Rs 272.50 crore (Rs 893.76 – Rs 621.26 ) will be met by additional subordinate loan from GOI of Rs 190.75 crores and additional equity/IR of NHPC of Rs 81.75 crores. The debt/equity ration of 70:30 will be maintained at the RCE level of rs 893.76 crores.
5.0
Approval Required
5.1.1 Recommendation of Public Investment Board is solicited for approval of the Revised Cost Estimate of Chutak HE Project amounting to Rs 893.76 3
crore including IDC & FC of Rs 31.86 crore at July 2010 P.L but excluding contingent liabilities. 5.1.2 Recommendation for release of additional subordinate debt of Rs 190.75 crore, beyond Rs. 364.00 crore already sanctioned.
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NOTE FOR CONSIDERATION OF PUBLIC INVESTMENT BOARD (PIB) ON ST 1 REVISED COST (AT JULY 2010 PRICE LEVEL) OF CHUTAK HYDRO-ELECTRIC PROJECT (44 MW), JAMMU & KASHMIR 1
Project identification
1.1 Title of the Programme/Project Chutak HE Project (44 MW) in Jammu & Kashmir 1.2 Name of the sponsoring agency (Ministry/ Department/ Autonomous Body/Central PSE): Ministry of Power/NHPC Ltd. 1.3 Duration of the programme/ project: a) Original/ latest approved. 54 months w.e.f the investment approval date(24.08.2006). Thereby
Original
&
the
Latest
Approved
: 23.02.2011
Schedule date of Completion b) Revised duration being proposed now. 78 months w.e.f the investment approval date(24.08.2006) Actual date of Completion of the Project
1.4
: 01.02.2013
Total cost of the project over the proposed duration: a) Original/ latest approved. Original & Latest Approved cost of the
: Rs.621.26 crore (including
Project ,at Dec.2005 P.L
IDC & FC of Rs. 3.69 crore)
b) Revised Cost (RCE) being proposed now. Revised Cost(RCE) being proposed at
: Rs. 893.76 crore (including
July 2010 P.L duly vetted by CEA &
IDC &
recommended
crore)
by
the
Standing
Committee 5
FC of Rs. 31.86
2.
Project Category
2.1
Please indicate which category the Programme/project belongs to and the detailed reasons for the same: (a) Only Time overrun Not applicable. (b) Only Cost Overrun. Not applicable. (c) Both Time and Cost Overrun Time Overrun = 24 Months Cost Overrun = Rs 272.50 crore
3.
Project Objectives and Targets
3.1
The objectives of the project may be mentioned. The 44 MW (4x11 MW) Chutak HE Project was envisaged keeping in view the acute power shortage of Ladakh region in Jammu & Kashmir, very high cost of generation from existing sources of generation which was mainly DG based and to boost socio-economic development of the area. Ladakh region is not connected with Northern Grid till now.
3.2
The specific targets proposed to be achieved of the project may be mentioned. These targets should be necessary measurable. These should also be monitor-able, against baseline data. The baseline may be indicated. The Targets should be in tabular form as shown below:Component
Year
Total
Year 1
Year 2 & so on
Physical Financial
Physical
Physical Financial total Total
Financial
Component 1,2,3& so on
Not Applicable, since the Project stands already commissioned since 01.02.2013. The power station is designed to generate 213 MUs in a 90% dependable year and will supply power to Kargil district of Ladakh Region.
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3.3
The outcome of the Project to be achieved should be indicated. These outcomes should be in the form of measurable indicators which can evaluate the Project on quarterly/half yearly/annual/plan basis. Same as in 3.2.
4.0
RCE Details
4.1
The details about the initial outlays, subsequently revised outlays (including all previous RCEs sanctioned with amount/date & reasons) and the latest proposed outlays may be provided. Initially, investment approval for the execution of Chutak HE Project (44 MW) in Jammu & Kashmir for an amount of Rs.621.26 crore (including IDC & FC of Rs. 3.69 crore) for implementation in Central sector by NHPC, has been accorded
vide letters dated 24.08.2006 & 23.11.2006.(Annex-8 & 9 of
Standing Committee report enclosed as Annex-B) No subsequent outlays have been proposed/approved. The present proposal is Ist RCE. The revised cost amounting to Rs. 893.76 crore (including IDC & FC of Rs. 31.86 crore) at July 2010 price level is being proposed for approval, duly vetted by CEA and recommended by the Standing Committee on time and cost overrun.
4.2
Details of physical progress achieved and expenditure incurred and commitment made so far may be given. The project has been commissioned and is under commercial operation w.e.f 01.02.2013. An expenditure of Rs 819.86 crores has been incurred till March 2014 and balance expenditure to be incurred is almost same as anticipated in the RCE i.e. Rs 73.90 crores. Beside above, there are contingent liabilities(Annex-A) amounting to Rs. 320.89 crore which have not been included in the present RCE as the same are subjudice/under Arbitration/under consideration, which is contingent in nature.
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4.3
Details of latest approved, Revised and proposed Completion Schedule of the project along with time overrun and reasons thereof may be elaborated. Date of Completion of Project.
: 23.02.2011
(as per Investment approval),
(54 months from the date of investment
approval
24.08.2006)
Revised date of completion of the project
Total time overrun
:
01.02.2013
:
24 months.
(Actual)
The detailed reasons of time overrun are given as under: Major Reasons for delay
1. Delay in award of E&M package due to poor participation affected the completion schedule by 4 months. 2. HM contract package was also delayed by 4 months due to abnormally high price bid necessitating re-tender of the work. 3. Works and Supplies of essential materials got delayed due to agitation of Amarnath Sangharsh Samiti from June'08 to Sep'08. 4. Due to civil disturbance in J&K from June’10 to Nov’10, the supply-chain of construction material, HM and E&M plant & equipments remained disrupted. As a result, the required consignments of the project could not be transported to site. Further, the storage of material for working during winter period, when the road access remained closed, could not be built-up (06 months). 5. Cloud burst in Leh area on 4/5th Aug’10 ravaged complete Leh area with unprecedented damage and casualties in the area, work impacted as laborers deserted the site (01 month). 6. Non-availability of sufficient load to run the machine (Unit – 1 loaded only upto 3.5 MW against installed capacity of 11MW) since November 2011 i.e. dates of Synchronization of Unit no. 1 &2. Total
Net Delay effecting time line (In months) (Net effect of both) 4
1
(Net effect of both) 5
14
24 Months 8
i.e
4.4
Item wise Cost Variation between approved(Latest) cost and revised cost as proposed may be given in the format given below:Rs in Crores
Sl
Originally Approved Cost/Latest Approved Cost
Ist Revised Cost Estimate at JULY-10 PL
Variation
6.03
6.36
0.34
B - Land C - Works J - Power Plant Civil Works K - Buildings
7.31 96.25 284.5
7.21 108.69 341.77
-0.10 12.44 57.26
22.74
15.22
-7.52
O - Miscellaneous
13.11
18.70
5.60
P - Maintenance During Construction Q - Special Tools and Plants R - Communication
4.31
1.88
-2.43
1.80
2.36
0.56
27.69
9.03
-18.66
X - Environment and Ecology Y - Losses on Stock
9.96
7.15
-2.81
1.08
1.19
0.11
TOTAL OF I WORKS II - Establishment (5% of I - Works - B Land) III - Tools and Plants (0.5% of I Works)
474.78
519.56
44.78
25.88
39.71
13.83
2.38
1.00
-1.38
-1.66
-15.94
-14.28
501.38
544.33
42.95
Components
A
CIVIL WORKS
1
DIRECT CHARGES I - Works A - Preliminary
IV - Suspense V- Receipt & Recoveries TOTAL DIRECT CHARGES
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2
B
INDIRECT CHARGES I - Capitalised Value of Abatement of Land Revenue (5% of Cost of Culturable Land) II - Audit & Accounts Charges TOTAL INDIRECT CHARGES TOTAL CIVIL WORKS ELECTRICAL WORKS TOTAL COST (CIVIL + ELECTRICAL) INTEREST DURING CONSTRUCTION (AT DEBT : EQUITY = 70 : 30) FINANCING CHARGES (FC) TOTAL COST INCLUDING IDC & FC
0.16
0.16
0.00
4.71
6.31
1.60
4.87
6.47
1.60
506.25
550.8
44.55
111.32
311.10
199.78
617.57
861.90
244.33
3.12
31.26
28.14
0.57
0.60
0.03
621.26
893.76
272.50
4.5 Quantification and Reasons for change in Cost: The Quantification& reasons for increase of Rs.272.50 crore are given as under:S.No.
Description
a)
Price escalation
b)
Exchange rate variation
c)
Statutory Levies
41.22
d)
Increase in IDC & FC
28.17
e)
Addition / Deletion (i) Change in Scope (ii) Under Estimation (iii) Over Estimation Total
f)
Others Total
Increase Over Sanctioned Cost (Rs. in Cr.)
Reasons
93.56
Due to increase in Prices and has been worked out as per the contract provisions. -
0.0
-25.10 149.09 -14.43 109.56 Nil 272.50
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Due to increase in taxes and duties e.g. WCT, CST etc. Due to Cost and Time overrun. Due to higher rate of awards& some changes as per actual site requirements which have been recorded in para 3.2 of the Standing Committee report.(Annexure B)
Increase in Cost within and beyond approved time cycle Rs. in Crore.) Cost Overrun within Cost Overrun beyond Total cost approved time cycles approved time cycles overrun
Reason
Price escalation& Exchange rate variation Statutory Levies Increase in IDC & FC Change in Scope Over / Under Provision Total 4.6
44.08
49.49
93.56
34.12 19.59 -25.10 108.88 181.57
7.10 8.58 0.0 25.78 90.95
41.21 28.17 -25.10 134.66 272.50
If the change in cost is due to Change in Factors 4.5 (e) then provide the relevant information and the justification. The change in cost has been given at Para 4.5 above. The detailed justification stands recorded at para 3.2 of the Standing Committee Report (Annex-B).
4.7
If the project involves more land acquisition then indicate the name of agency which is providing the land. If such land is to be acquired then resettlement/rehabilitation cost may be provided. No more Land Acquisition is required..
4.8
Effect of revision in capital cost estimates on cost of production and profitability/viability with reference to earlier approved capital cost of the project. The first year Tariff and Levelised Tariff of Rs 4.65/unit & Rs 4.47/unit have increased to Rs 7.56/unit & Rs 7.37/unit respectively due to revision in capital cost. Since the tariff is decided by CERC based upon fixed return on equity as per their guidelines, there will not be any effect on the profitability due to revision of cost.
4.9
Report of the Standing Committee to fix the responsibility for cost and time overrun along with action taken report on its recommendation may be appended with the RCE memo. The Report of Standing Committee and action taken report are appended with the RCE memo as Annex- “B”.
5.0
Plan provisions and funding
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5.1
Revised Phasing of Expenditures and source of funding. *The Revised and Actual Phasing of Expenditure and source of funding is as under:- : Upto Year ended
Equity IPO Internal Debts through from GOI Proceeds Resource Internal Subordi‐ Domestic s (in lieu Resources (in lieu nate loan of equity of Loan) Debts upto 30%)
31.03.2001 5.62 (5.62) 31.03.2002 5.62 (4.96) 31.03.2003 5.62 (3.64) 31.03.2004 5.62 (1.51) 31.03.2005 5.62 ‐ 31.03.2006 5.62 ‐ 31.03.2007 41.97 ‐ 31.03.2008 41.97 0.00 31.03.2009 41.97 29.54 31.03.2010 41.97 18.68 63.54 31.03.2011 41.97 143.17 1.45 31.03.2012 41.97 175.88 1.73 Upto COD: Feb‐13 41.97 180.99 6.75 After COD: Upto Mar‐14 41.97 200.65 3.34 After COD: After Mar‐14 41.97 200.65 25.51 Note : The figures given above are cumulative
5.2
Total
‐ ‐ ‐ ‐ 2.85 7.87 1.70 27.94 96.86 204.79 1.37 75.97 101.12
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 70.00 0.00 70.00 15.00 70.00 364.00 70.00 364.00 72.38 364.00 70.88
139.02
364.00
70.88
819.86
0.00
554.75
70.88
893.76
‐ 0.66 1.98 4.11 8.47 13.49 43.67 139.91 238.37 413.98 621.95 731.93 765.71
Details regarding the change in funding pattern, along with justification. Details of Sanctioned vis-à-vis proposed funding pattern is given as under:-
186.38
Proposed Funding Pattern in the Revised Cost 268.13
Increase/ Additional fund requirement 81.75**
364.00
554.75
190.75**
70.88
70.88
0
621.26 70:30
893.76 No change
272.50 No change
3.19
---
4.65
7.56
2.91
4.47
7.37
2.90
Component
Sanctioned Funding Pattern
Equity to be provided by NHPC Subordinate debt to be provided by GOI1 Commercial loan to be raised by NHPC Total Cost Debt (including subordinate debt), equity ratio 1st year Tariff without taxes ( as per earlier CERC Norms)*. 1st year Tariff* (as per prevailing CERC norms with taxes). Levelised Tariff 1
“Subordinate debt of Rs.364 crore at an interest rate of 2.5% per annum with repayment of principal to start from the 6th year after commissioning and continue till the 29th year; no interest on subordinate debt during construction; and interest on subordinate debt to accrue and be paid annually after commissioning”. * Water usage charges works out to Rs.1.94/Unit which is not included in the tariff.
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**Out of RCE of Rs 893.76 crore , Rs 819.86 crore has already been incurred up to March 2014 , where by Rs 384.98 crore have already been spent through internal resources out of which Rs 139.00 crore is in lieu of sub debts. Further, cost to be incurred after March 2014 is Rs 73.90 crore out of which Rs 51.73 crore (70%) is to be funded through sub debts. Total additional requirement of sub debt in RCE is Rs 190.75 crore i.e (139.02 + 51.75) crore.
Justification Adopting Debt/Equity ratio as 70:30 and by keeping the Sub-debt same as sanctioned and meeting out the balance increased debt portion through commercial loan, the first year tariff &levelised tariff works out to Rs. 8.35 per unit and Rs 7.62 per unit respectively (excluding water usage charges which is Rs.1.94/unit), which are on higher side. To bring down the tariff, it is proposed that with same Debt/Equity ratio of 70:30,the increase in debt portion be met out by increasing sub-debt and keeping the commercial loan same as sanctioned. By doing so the first year tariff & levelised tariff works out to Rs. 7.56 per unit and Rs 7.37 per unit respectively (excluding water usage charges which is Rs.1.94/unit). 5.3
Availability of Plan outlay in FYP/Annual Plan may be indicated. The 12th Plan Outlay of Rs 29368.95 crores for NHPC has been approved by Ministry Of Power which includes GBS (Government budgetary support) in the form of sub-debt of Rs 2056.91 crores & IEBR(Internal & Extra budgetary support) of Rs 27312.04 crores . It includes a provision of Rs 124.73 for Chutak HE Project. The project has already been commissioned and balance anticipated expenditure to be incurred is Rs 73.90 crore.
6.
Approvals
6.1
Please indicate the specific points of RCE memo on which approval of PIB is sought.
6.1.1 Recommendation of Public Investment Board is solicited for approval of the Revised Cost Estimate of Chutak HE Project amounting to Rs 893.76 crore including IDC & FC of 31.86 crore at July 2010 price level excluding contingent liabilities as per proposed funding pattern. 6.1.2 Recommendation for release of additional subordinate debt of Rs 190.75 crore, beyond Rs.364.00 crore already sanctioned.
(Mukesh Jain) Joint Secretary to the Govt. of India Tel. No. 23714367
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