REPORT OF THE PUBLIC ACCOUNTS COMMITTEE ON THE ‘PRIVATISATION OF POWER IN DELHI'
Para 6.14.6 Appointment of Consultant for Re-structuring (Excerpts from the Report of the C&AG as appearing in the Report for the year ended 2003):
“While approving the formation of the generation and transmission companies, the GNCTD also approved (June 1998) the appointment of the Administrative Staff College of India (ASCI), Hyderabad, as consultant for the power sector reforms. ASCI submitted (November 1998) its offer of Rs. 75 lakh for undertaking the consultancy work, which was subsequently (October 1999) reduced to Rs. 60 lakh. In the meantime in October 1999, two more offers were received from M/S SBI Caps and ICICI for undertaking the consultancy work. The details of the three offers received were as follows:
Name of Original Offer Revised offer the Party SBI Caps Rs. 95 lakh + 1 per cent of Rs. 70 lakh + 0.5 per cent of total value of sale of total value of sale consideration DISCOMs + prescribed out of realized from DISCOMs + out of pocket expenses (received pocket expenses limited to on 07 October 1999). Rs. five lakh. ICICI Rs. 75 lakh + 0.5 per cent of Revised offer neither invited nor the total asset value of the received. distribution business + out of
pocket expenses for actual amount incurred (received on 18 October 1999). ASCI Rs. 75 lakh + amount paid to Rs. 65 lakh (received on 28 the consultant hired for March 1999). Further revised to preparation of accounting Rs. 60 lakh on 26 October 1999 work (received in November when DVB informed that SBI 1998). Caps would be separately appointed for certain items like valuation and allocation of assets, financial re-structuring, etc.
GNCTD accepted the offer of SBI Caps and an agreement was signed on 24 January 2000.
1 Report of the Public Accounts Committee on ‘Privatisation of Power’ It was observed in audit that no discernible procedure or method was followed for selection of consultants. There was no effort to invite competitive bids from the open market nor was there any attempt to first assess and define the scope of work to be assigned to the consultants which would have enabled a systematic and transparent comparison of the offers received. Prima facie, all the three parties were reputed and eligible and the offers received were comparable but thorough consideration was in fact given only to the offer of SBI Caps.
Government stated (October 2003) that there was never any intention to invite competitive offers and that SBI Caps had been proactively contacted in view of their experience in Kanpur and their adoption of the Business Valuation Method for valuation of assets. It was added that the ASCI offer did not include assistance right through the entire process as offered by SBI Caps and that their scope of work was limited to a one-time document. Further, the work of financial re-structuring in the ASCI offer would have to be attended to by another consultant, which would have added to the cost. As regards the offer of ICICI, the Government stated ICICI did not have a good track record. Moreover, its offer was found to be costlier than that of SBI Caps as it was for a fixed fee plus success fee of 0.5 per cent of the total asset value of the distribution business which would have worked out to about Rs. 13.60 crore viz. 0.5 per cent of Rs. 2,719 crore being the total asset value of the three DISCOMs. On the other hand, SBI Caps had asked for a success fee of 0.5 per cent of the total consideration realised by sale/disinvestment, which had Excerpts ultimately worked out to Rs. 2.50 crore. Government added in December from C&AG’s 2003 that there was no rule requiring prior definition of the requirements and Report scope of work and that they had sufficient justification for their decision to appoint SBI Caps as consultant.
The point remains that given the magnitude and complexity of the exercise and its criticality to the entire privatisation effort inasmuch as it provided the road map for the privatisation of the entire distribution function, the requirements and scope of the work should have been first defined to the extent possible and then all the three eligible bidders asked to submit detailed offers with reference to the defined requirements/ scope of work. This would have provided a credible assurance as to the cost benefit and of the transparency of the entire process. It was further seen that SBI Caps was engaged by DVB in December 2001 as consultants on single quotation basis for filing tariff application with DERC for determining bulk tariff at which TRANSCO would sell power and the opening loss levels of the three DISCOMs for the year 31 March 2002 at a fee of Rs. 40 lakh. The same work for the year 2002-03 had been awarded to ASCI at a total fee of Rs. 12 lakh. 2 Report of the Public Accounts Committee on ‘Privatisation of Power’ Government stated (October/ December 2003) that there were major differences between the two works of filing Annual Revenue Requirement (ARR) with DERC by SBI Caps in December 2001 and by ASCI as given below: ARR was to be filed by SBI Caps for five future companies before they become operational on the basis of DVB data while in the case of ASCI, the ARR was to be filed only for TRANSCO; For determining the ARR for the five future companies, SBI Caps had to collect data direct from various offices of DVB while ASCI could use data available from TRANSCO; and Aggregated Technical & Commercial losses (AT&C) had to be worked out for prospective DISCOMs by SBI Caps while this was not required in case of ASCI.
The reply of the Government is not tenable as the data required by SBI Excerpts Caps for the ARR had already been collected by them earlier at the time of from C&AG’s preparation of the final report and detailed calculation for support loan Report required in July 2001. Further, the data required was cycle summaries, which were available in the EDP Section of DVB. The additional data collected was for only three months i.e. August 2001 to October 2001. The AT&C losses had also been worked out in the final report and SBI Caps had to collect only three months additional data for calculation of AT&C losses for filing of tariff application and for filling up the data in the prescribed format. Hence, the gross difference in the amounts paid to SBI Caps and subsequently to ASCI was not justified given the work actually involved.”
REPLY OF THE DEPARTMENT:
The Department in its written reply and submissions before the Committee justified their appointment of SBI Caps (SBI Capital Markets Ltd) as the consultants, on the grounds that SBI Caps were experienced in the field and had a proven track record. The Department also furnished a list of projects where SBI Caps had been engaged by various Government organizations on nomination basis without calling for open tender.
The Department stated that it was not possible to spell out precise requirements and scope of work as a basis for tendering in advance because it was for the consultants to propose a road map for privatization from which the requirements and scope of work would arise. It stated that if the consultants had chosen a different valuation methodology, the requirements and scope of work would have differed considerably and thus it would have not been possible to evaluate alternative consultancies based on alternative road maps.
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The Department stated that ICICI’s performance in the privatization exercise in East Delhi had not been ‘up to the mark’. They further claimed that in the states where ICICI had been appointed as consultant, the privatization process had not shown significant progress. It has also been further claimed that ICICI later on closed their consultancy wing, which reflected their lack of success in this area. In the matter of ASCI, who had also submitted their offer for providing consultancy, the Department has stated that ASCI had withdrawn their offer in the interest of ‘expeditious privatization’.
It was further stated by the Department that as DVB was unviable with long duration power cuts, regular defaults on payments for power purchases and huge transmission, distribution and commercial losses, there was an urgent need to restructure DVB to make it sustainable and under such circumstances it was necessary to quickly finalise selection of consultants as delays would have cost DVB as well as Government of Delhi dearly.
FINDINGS OF THE COMMITTEE:
Considering the observations in the C&AG’s report and reply of the Department the Committee is of the opinion that the Department had failed to do the necessary groundwork before appointing the consultants. The Department erred on two counts. First, the prescribed procedure for appointment of consultants was not followed. Secondly the ‘terms of reference’ on which the consultant was to submit a report was not finalized.
The report of the consultant was to be the foundation on which the whole process of power reforms rested. The consultant is expected to frame the guidelines and roadmap for the entire process. He is to suggest the detailed modalities and procedure that is to be followed keeping in view the requirements of the Department.
As the Department’s books of accounts were in a sorry state, it would have been prudent to rectify them so as to obtain clarity before appointment of consultant; instead appointment of consultant was done in a short cut manner. As observed by the C&AG the Department had failed to determine the requirement and scope of work that was to be entrusted to the consultant. Since the department failed to describe its job requirement and the scope and nature of work expected from the consultant, the department was left with no other option but to accept the consultant’s recommendations.
4 Report of the Public Accounts Committee on ‘Privatisation of Power’ The Department should have first decided the ‘terms of reference’ on which the consultants were to act upon. Open tenders should have been floated and the ‘terms of reference’ should have been made available to each bidder to ensure a level playing field. Howsoever, impressive the performance of SBI Caps may have been, the Government procedure on financial matters does not permit any Department to ‘proactively’ contact a single company for its services. In the absence of uniform ‘terms of reference’ the bids of the three Companies, viz., SBI Caps, ICICI and ASCI cannot be compared.
The Department has mentioned in its written reply that the lack of Fixed Assets Register in Delhi Vidyut Board resulted in failure of ICICI in respect of privatization in East Delhi. In such a situation the consultant cannot be blamed for a lapse on the part of the Department. Similarly if a State chooses to not act upon the report of the consultant it cannot be claimed as a reflection on the performance of the consultant. The fact that ICICI closed their consultancy wing later also has no bearing in this case because it was a development, which had taken place much later. In the matter of the bid submitted by ASCI also the Department has not brought out the correct fact because ASCI had withdrawn their offer only after the decision to appoint SBI Caps for certain crucial and qualitative fields such as valuation and allocation of assets, financial restructuring etc. had been taken. From the letter of the Principal (ASCI) dated 26th October 1999, it is clear that he had already been informed that works relating to valuation of assets, allocation of assets to generation and distribution companies, financial restructuring of DVB and the new entities and developing their balance sheets would be entrusted to SBI Caps. In his letter dated 28th December 1999, the Principal, ASCI stated that they were withdrawing their offer of consultancy because; “two agencies studying the same issue when very quick decisions are to be taken may not be purposeful.” During the course of scrutiny of the documents submitted by the Department, the Committee found that SBI Caps had engaged M/s. Tata Consultant Engineers for the technical report. The propriety of a sister concern viz., Tata Power Limited, being allowed to bid for the DISCOMs is questionable. Having been involved in the consultancy process the Tata Company was privy to detailed information, which was not available to the other bidders. As is obvious the Department instead of opting for an open tender, contacted these consultants selectively at various time with different requirements. In the absence of uniformity in the requirement of nature and scope of work on which the consultants were expected to act, it was natural that there would not be uniformity in their bids. It is for this reason that the three consultants submitted their bids with different options and hence their rates were not comparable. 5 Report of the Public Accounts Committee on ‘Privatisation of Power’ The guideline of the CVC (Central Vigilance Commission) on appointment of consultants (No. 3L – IRC 1 dated 10.1.1983) stipulates that ‘public notice should be issued to enlist names of suitable consultants’.
A subsequent guideline of the CVC (No.OFF 1 CTE 1 dated 25th November 2002) is also worth mentioning here. It inter alia states: “The consultants are still appointed in an ad-hoc and arbitrary manner without inviting tenders and without collecting adequate data about their performance, capability and experience. In some cases, the consultants were appointed after holding direct discussions with only one firm without clearly indicating the job content and consultation fee payable to them. Often the scope of work entrusted to the consultants is either not defined property or the consultants are given a free hand to handle the case due to which they experiment with impractical, fanciful and exotic ideas resulting in unwarranted costs. The organizations display an over-dependence on consultants and invariably abdicate their responsibility completely to the latter. The officials do not over see the working of the consultants resulting in the latter exploiting the circumstances and at times, in collusion with the contractors, give biased recommendations in favour of a particular firm.
……..The Commission would like to reiterate the instructions regarding appointment of consultants. The appointment of consultants should be absolutely need based and for specialized jobs only. The selection of consultants should be made in a transparent manner through competitive bidding. The scope of work and role of consultants should be clearly defined..”
The Department had thus failed to adhere to the prescribed financial procedures as well as the guidelines of the CVC, while appointing SBI Caps as the consultant. The appointment of Tata Consultant Engineers for technical matters and their sister company i.e. Tata Power Company Limited being allowed to participate in the bid also needs investigation. The Hon’ble Lieutenant Governor may be requested to refer the matter to the Central Vigilance Commission for a thorough probe to determine the complicity and motive on the part of the officials involved in the whole exercise of appointment of the consultants, which to this committee seems to have been done in an indecent haste by flouting the guidelines of the CVC in this regard.
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Unbundling of DVB 6.14.7 Valuation of Assets (Excerpts from the Report of the C&AG as appearing in the Report for the year ended 2003):
Government decided to use the Business Valuation (BV) method for valuation of assets. (The essence of this valuation process is to set targets for five years in terms of efficiency gain, make plausible assumptions about retail tariff increases and expenses and then calculate the value of the liability which can be met though the earnings projected and the value of the asset is derived on that level of liabilities that can be serviced) The consultant had advised that the value of assets using the BV method cannot be compared with the book value of the DVB assets as depicted in their accounts. The consultant furnished details giving the book value for various years as per DVB’s books of accounts (unaudited) as well as the re-stated book value of net fixed assets as calculated by SBI Caps (with accumulated depreciation) as follows:
Table 6.17: Details of Book value of Assets as per Balance Sheet and as adopted by SBI Caps (Rupees in crore) Period With accumulated Book Value as ended deprecation by SBI per Balance Caps sheet March 2804 3126.69 2000 March 2997 3470.25 2001 March 3182 3576.16 2002 v March 3290 Not available a 2003 l u e The book value has been re-stated because the capital works in progress have not been capitalised in the books of DVB for many years and the requisite depreciation was not charged on uncapitalised portion of the assets. To that extent, the book value did not indicate the true value of the assets.
7 Report of the Public Accounts Committee on ‘Privatisation of Power’ The asset value assigned to each Company was as follows:
Table 6.18: Asset value assigned to each company (Rupees in crore) GENCO TRANCO Central South – North – Total East West North West Gross 510 650 360 1533 1210 4263 Block Accumulat 160 200 70 383 290 1103 ed depreciatio n Net Block 350 450 290 1150 920 3160
In response to an audit query as to the basis for the valuation of the assets, Government stated (October 2003) that the details of the calculation was available only with the consultants in their computer modelling which were not available with the Government. It was added that the consultants did not Excerpts from normally disclose their computer modelling as they regarded it as their C&AG’s business secret. However, the Government furnished a note on the Report methodology adopted in asset valuation. A scrutiny of the note indicated that while the general methodology had been explained, the basic figures adopted, the weightages given and assumptions made were not indicated and hence the basis of arriving at the final figure of Rs. 3,160 crore could not be verified. The Government had evidently relied solely on the report of the consultant.”
REPLY OF THE DEPARTMENT: In its written reply and submissions before the Committee the Department stated that the Government had relied solely on the report of the consultant because “that is what they were engaged for”. It stated that only another consultant could have checked the complicated computer modeling done by the SBI Caps for valuation and it would not have been possible to compel the consultant to allow this nor was it considered necessary. The Government was concerned only to understand and approve the methodology, which it did and for the detailed work, it naturally relied on the consultants. The department claimed that if they were to appoint another consultant, they would have had to spend another 60-70 lakhs of rupees, which would not have been appropriate in the given circumstances. The consultants used sophisticated computer modelling and business valuation done by them is reasonable and just and it was found to be most appropriate method for the erstwhile DVB also because DVB did not have proper fixed asset register for the last 15 years.
8 Report of the Public Accounts Committee on ‘Privatisation of Power’ FINDINGS OF THE COMMITTEE: As is apparent from the observations of the C&AG the Department chose to adopt the Business Valuation methodology for the valuation of its assets. The Department had cited three reasons for opting the Business Valuation methodology in its written reply: First, DVB (Delhi Vidyut Board) did not have proper Fixed Asset Register; the valuation of assets affects the tariff and overvaluation would have necessitated a higher tariff; and business valuation methodology was appropriate in electricity business as the licensee is not able to strip the assets and must operate the business under the scrutiny of the Regulatory Commission. The Department’s admission that the DVB’s fixed asset register was not complete indicates a very serious lapse on the part of the officers manning the erstwhile DVB. It is surprising that the Department has not found it fit to seek the reasons for this lapse. Instead it chose to gloss over it and opt for the easiest way out. The statement that the Department had no idea of its own assets is a grave admission of its inexcusable act. No Government property, whether fixed or moveable, can be left unaccounted. The financial rules prescribe procedure for even condemnation of small items or sale of scrap. The asset register is expected to reflect whether a particular asset is installed and working or it has been condemned or stolen or lost. It cannot be simply left unaccounted for. The Committee is of the opinion that in the absence of complete Fixed Asset Register the Department had no option but to opt for the business valuation methodology for the valuation of its assets. The Committee held a meeting on the 4th July 2005 to view a presentation of the business valuation methodology adopted by SBI Caps. Officers of the Power Department and SBI Caps were present in the meeting. The business valuation methodology involves calculations based on weightages and assumptions. These weightages and assumptions are subjective and not necessarily accurate. Had the task been entrusted to a different consultant they would have arrived at a different figure based on a different set of assumptions and weightages. Moreover, actual t&d losses, average billing rate, collection efficiency, cost of inputs, supply of electricity from different generating units and projected inflation in cost of various inputs required for generation of power were crucial inputs necessary for the business valuation methodology. In the absence of proper records the consultants had to resort to approximate figures and generalized assumption, which would in turn affect the final result. 9 Report of the Public Accounts Committee on ‘Privatisation of Power’
The Department failed to verify the authenticity of the data used for the assumptions and projections. The assumptions and projections with reference to the data made were on the basis of past trend, sample data, industry trend, inflation in cost of inputs and supply of electricity, supply from various power stations and corresponding demand thereto. The Department did not analyze the authenticity of these and they solely relied on the consultant’s report. The major components of the valuation were opening level of AT&C Losses, year wise target for reduction in AT&C losses and percentage of tariff hike. The assumed opening AT&C losses were higher at the time of valuation and 2-4% lower at the time of actual handing over making the task of the DISCOMs easier for reducing AT&C losses. Besides the capital expenditure incurred after valuation of assets i.e. during 1.4.2001 to 30.7.2002 was not accounted for in valuation. Had the accounts of the DVB been complete the Department could have made a more comprehensive comparison of the two methodologies (book valuation and business valuation) and adopted the one, which favoured the Government’s interest more. Having chosen the business valuation methodology the Government was bound by the report of the consultant and had no option of verifying the end result. Therefore it was necessary for the Department to be sure of its assets as per the book value for a favourable comparison with the findings of the consultant. In reply to the observation of the C&AG’s observation that the Government relied solely on the report of the consultant, the Department brazenly stated that ‘this is not denied; this is what the consultants were engaged for.’ (Surprisingly the Department did not feel it fit to rely on the consultant’s figures on the AT&C Loss reduction percentage and pending dues of the DVB (receivables) and later revised the figures in favour of the DISCOMs. These have been dealt with in the later Paras.) Guidelines of the CVC (No.OFF 1 CTE 1 dated 25th November 2002, which has been mentioned earlier also, advises the Departments to avoid precisely such a situation. It states: “…often the scope of work entrusted to the consultants is either not defined property or the consultants are given a free hand to handle the case due to which they experiment with impractical, fanciful and exotic ideas resulting in unwarranted costs. The organizations display an over-dependence on consultants and invariably abdicate their responsibility completely to the latter.” 10 Report of the Public Accounts Committee on ‘Privatisation of Power’
Under Rule 3(1) of the Delhi Electricity Reform (Transfer Scheme) Rules 2001, on and from the date of the transfer all the assets liabilities and proceedings of the Delhi Vidyut Board stood transferred to and vested in the Government. Assets have been defined in the Rules as ‘includes all rights, interests and claims of whatever nature as well as block or block s of assets of the Delhi Vidyut Board.’ Rule 5 of the Transfer Scheme Rules, read with Schedule D, E&F provided that these assets (excluding land) would further stand transferred and vest in the successor DISCOMs and accordingly these have been transferred to the respective DISCOMs. As regards ‘land’ Schedules D, E&F of the Transfer Scheme Rules states that: “The transferee shall be entitled to use such land as a licensee of the Government on payment of a consolidated amount of One rupee only per month during the period the transferee has the sanction or licence or authorization to undertake the distribution business. As and when such licence or sanction or authorization is revoked or cancelled or not renewed or the area of supply where the land is situated is withdrawn from the transferee, the licence to the transferee in respect of such land shall stand cancelled”
In consideration of the transfer of the assets the DISCOMs were to issue shares and instruments in favour of the Holding Company (Delhi Power Company Limited) and the Holding Company was to further issue shares and instruments in favour of the Government. Accordingly DISCOM 1 (now BSES Yamuna) issued share worth Rs. 116 crores, DISCOM 2 (now BSES Rajdhani) issued share worth 460 crores and DISCOM 3 (now NDPL) issued shares worth Rs. 368 crores. In other words the assets of the erstwhile DVB falling in the area of the respective DISCOMs were transferred to them for a cost of Rs. 944 crores in the form of share capital and Rs. 1416 crore in form of loan with a moratorium of four years payable to Delhi Power Company Limited (Holding Company). For the use of land they were to pay a nominal fee of One Rupee per month.
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The Committee feels that in the absence of proper records, the value at which this transfer has taken place can be questioned and challenged and there have been allegations of under valuation, which cannot be discounted. The basis on which the magic figure of 3160 crores was arrived at is not clear. For instance while eighty-five 33 KV Grids and fifty-two 66 KV Grids have been transferred to the DISCOMs, in its reply dated 4th August 2005 the Department states that ‘as no proper Fixed Assets Register was being maintained, the value of individual grid cannot be ascertained.’
In the matter of transfer of land, the Department has stated that the value of land was not taken into consideration because land was not sold but transferred on lease. The Committee sought to know whether any guidelines or orders had been issued to ensure that the land and building transferred to the DISCOMs are not utilised for purposes other than distribution. Vide its reply dated 4th August 2005 the Department stated that ‘land can be exclusively used for the purpose of carrying out distribution business.’ They further mentioned the following statutory provisions as justification of their argument that sufficient safeguards were available: “Section 5(3) of Delhi Electricity Reform (Transfer Scheme) Rules, 2001: ‘The rights in the undertaking or the assets transferred to the transferee shall be subject to the restrictions and limitations, specified in these rules or in the applicable schedule.’ “Section 17(3) of Electricity Act, 2003: ‘No licensee shall at any time assign his licence or transfer his utility, or any part thereof, by sale, lease, exchange or otherwise without the prior approval of the appropriate Commission.”
The Transfer Scheme Rules mentioned above states that the rights on the assets would be subject to the restrictions and limitation specified in the rules or schedule. Unfortunately no such restriction or limitation has been mentioned in the rules or schedule. Schedules D, E & F of the transfer scheme states that: “the transferee shall be entitled to use such land as a licensee of the government on payment of a consolidated amount of one rupee only per month during the period the transferee has the sanction or licence or authorization to undertake the distribution business.”
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The above clause means that as long as the DISCOMs have the license to undertake the distribution business they shall be entitled to use such land. Nowhere has it been mentioned that the ‘use’ would be for distribution business. There is no restriction on the purpose for which these transferred assets can be used.
The provision of the Central Act (section 17 of Electricity Act 2003) mentioned by the Department also merely places a restriction on the licensee from further transferring his licence or utility. The committee’s concern is regarding the absence of checks and balances to ensure that the land and building transferred to the DISCOMs is not utilised for purposes other than the distribution business. There appears to be no safeguard to prevent the DISCOMs from exploiting the prime land and building for commercial purposes.
The genesis for these problems of under valuation can be traced to the callous manner in which the accounts of the Delhi Vidyut Board had been maintained. The entire system lacked supervision and accountability.
The Hon’ble Lieutenant Governor be requested to order an enquiry by the Central Vigilance Commission in to the conduct of all those top officials, who managed the erstwhile DVB in the last three years prior to privatisation, for their acts of criminal breach of trust, dereliction of duty, negligence and lack of supervision on their part. They had failed to ensure proper maintenance of audited books of accounts, asset registers, inventory of stocks etc. This gross act of negligence has cost the exchequer several thousand crores since in the absence of all these vital records the government was forced to accept the asset valuation done by the sole consultant and property of the erstwhile DVB running into several thousand crores was transferred to the DISCOMs for pittance. This action at this stage is of paramount importance so that it acts as a deterrent for the other Heads of other commercial undertakings of the Government.
13 Report of the Public Accounts Committee on ‘Privatisation of Power’ 6.14.8 Outstanding Receivables of DVB (Excerpts from the Report of the C&AG as appearing in the Report for the year ended 2003):
The consultant proposed to transfer all except one month’s receivable to the Holding Company with 20 per cent collection charges being allowed to the DISCOMs for collecting these dues from non-Government agencies. The consultant worked out the outstanding receivables of DVB up to October 2000 as follows:
Table 6.19: Details of outstanding receivables of DVB up to October 2000
(Rupees in crore) Consumer Category Amount Large Industrial Power (LIP) 59.42 Small Industrial Power (SIP) & non domestic 583.73 Domestic 905.05 Water 624.60 Agriculture 68.63 Public lighting 93.34 Total 2334.77
Scrutiny in audit revealed the following:
The receivables from LIP consumers related to the outstanding amount for the year 2000-01 only. This contributed to a difference of Rs. 3,107.62 crore between the figure of outstanding receivables of Rs. 5,442.39 crore reflected in the Balance Sheet for the year ending 31 March 2002 of DVB and that worked out by the consultant;
The amount of bulk supply arrears had been worked out in June 2003 after one year of privatization whereas it should have been done by 30 June 2002. Further, the amount was calculated by adding the arrears on 31 March 1994 to the arrears of 30 June 2002 as shown in the bills for the month of June 2002 instead of adopting the ledger figures. No adjustments had been carried out on account of recovery, settlement of court cases, fuel price adjustments, etc. during the intervening period of more than eight years and consequently the accuracy of the arrears calculated were doubtful; and
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The DVB arrears were calculated for other than bulk supply on the basis of bill arrears of more than Rs. 10 for all the consumers. The adjustment made on account of assessment made on average billing, premises locked, disconnection, court cases and misuse withdrawn/ levied were to be intimated under a particular code but the DISCOMs made the adjustments under the earlier code instead of the code intimated.
Government stated (September 2003) that the total figure of Rs. 3,600 crore was extracted on the basis of data available in the EDP Centre of DVB as on 30 June 2002 in respect of outstandings pertaining to SIP, Bulk and Domestic consumers. It added inDecember 2003 that a team of Chartered Excerpts Accountants was being appointed by the Holding Company for the purpose of from checking the authenticity of the amounts and ensuring that the DISCOMs C&AG’s Report were making all efforts for such recovery. Separate software was also being developed for segregating the DVB arrear components and these figures were being furnished to each DISCOM for verification and recovery. It was also stated that during the period 2002-03 (July 2002 to March 2003), arrears collected by DISCOMs amounting to Rs. 104.64 crore (80% of Rs. 130 crore) had been remitted by them to the Holding Company.
The fact remains that it is the responsibility of the Delhi Power Company Ltd. (Holding Company) to recover all outstanding arrears of DVB period from the DISCOMs as per the Transfer Scheme and Agreement signed with them. The erstwhile DVB/ Government had failed to finalise the accounts for the period April 2000 to June 2002 even after 18 months of privatisation. The Holding Company had failed to recover any amount of bulk supply arrears from DISCOMs till 31 March 2003 and was also not in a position to provide details of arrears of DVB consumer wise as on 30 June 2002. Moreover, the opening Balance Sheet of the Holding Company did not depict the complete picture, as old debts recoverable were not shown in the Balance Sheet since the opening Balance Sheet was in statement form only.
15 Report of the Public Accounts Committee on ‘Privatisation of Power’ REPLY OF THE DEPARTMENT: The Department informed vide communication dated 23rd February 2005 that an amount of Rs. 4815.91 crores (Rs. 3427.70 crores from BSES and Rs. 1388.21 crores from NDPL) was outstanding as on 30th June 2005 as DVB arrears. As the DISCOMs did not agree with the figures of the DVB it had been decided that CA firms would be asked to conduct an investigative audit and report on the actual figures. For this purpose M/s Susheel Jeetpuria & Co was awarded the investigative audit work of all arrear cases falling under the jurisdiction of BRPL and NDPL at a cost of Rs. 40.13 lakhs. M/s SS Kothari & Co. was awarded the work for the arrears falling under the jurisdiction of BYPL at the cost of Rs. 12.26 lakhs. The Department further informed that the report of the investigative audit had been sent to the DISCOMs but the DISCOMs were of the view that not more than 15-20% of the amount was recoverable. As per the written reply submitted on the 4th July 2005, the recovery position as on 14.5.05 was as follows (amount in crores): S.No. Particulars NDPL BRPL BYPL Total 1 Amount recovered by the 110.41 131.47 89.79 331.67 DISCOMs 2 Amount collected from -- 4.15 0.98 5.13 Government connections 3 Amount payable against private 110.41 127.32 88.81 326.54 connections 4 Net amount payable to DPCL as 88.33 106.01 72.03 267.37 per transfer scheme (80% of private connections and 100% of Government connections) 5 Amount actually remitted to the 84.10 55.19 50.33 189.62 DPCL 6 Adjustments made by DISCOMs 4.24 50.82 21.7 76.76 7 Adjustments accepted by DPCL 1.3 14.26 0.83 16.39 8 Adjustments not accepted by 2.93 36.56 20.87 60.36 DPCL (under reconciliation/disputes 9 Amount actually received and 85.40 69.45 51.16 206.01 amount allowed to be adjusted by DPCL [(5) + (7)]
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FINDINGS OF THE COMMITTEE:
As per the Transfer Scheme Rules (Schedule D, E & F of the Rules) the DISCOMs were authorized to realize the receivables of the erstwhile DVB in its area of supply. Upon realization of such receivables the DISCOMs were to retain 20% of the amount and remit the remainder to the Holding Company.
From the reply of the department it is obvious that the DISCOMs had neither agreed to the DVB neither figures nor the figures worked out by the investigative audit. The Department has already paid the total fees (Rs. 52.39 Lakhs) to the CA firms. The DISCOMs had made very negligible recovery. As per the transfer scheme the DISCOMs were to remit 80% of this amount to the Holding Company i.e. Delhi Power Company Ltd. This was not done. Instead the DISCOMs adjusted these in lieu of other payments, which were due. Thus not only were the provisions of the transfer scheme rules violated, but also, the DISCOMs appeared to be not at all serious in recovering the arrears of the DVB even after three years of assuming the responsibility.
In the meeting held on 21st February 2005, the Departmental Representative stated that the holding company was reconciling the figures on quarterly basis. The Committee was also informed that the DISCOMs had been directed by the Chief Secretary, Delhi that no adjustments would be made without prior approval. The Department was directed to reconcile the amount in three months. However, in the meeting held on 10th June 2005 in which the Chief Secretary {who also holds the additional charge of Principal Secretary (Power)} was also present, the Department was still not aware of the exact amount, which was recoverable from the DISCOMs. In the meeting the Committee was informed that an amount of Rs. 329.78 crores had been collected by the DISCOMs but the amount actually remitted to the Government was not known.
17 Report of the Public Accounts Committee on ‘Privatisation of Power’
Out of total receivables of Rs. 3261.03 crores (excluding LPSC of 1544.88 crores) the DISCOMs in three years had managed to recover only Rs. 331.67 crores. Even out of this meagre recovery they were reluctant to remit the amount to the holding company i.e. DPCL as per the transfer scheme. As against an amount of Rs.267.37 crores the DPCL has actually received only Rs. 189.62 crores. The DISCOMs on their own adjusted Rs.76.76 crores, which was a violation of the Transfer Scheme Rules. Moreover the decision of DPCL to allow adjustments of Rs. 16.39 crores is also irregular because as per the transfer scheme there was no provision for such adjustments. The Government seems to have succumbed to the whims of the DISCOMs in matters of collecting its dues. Not only were the DISCOMs allowed to sit on the funds of the Government but also allowed to make adjustments without the prior approval of the competent authority.
If the DISCOMs were not to agree to the report of the investigative audit and were to rely on their own sources for arriving at a figure, which could be recovered, the Government had no need to conduct an audit at a cost of more than Rs. 52 lakhs. The amount paid to the CA firms appears to have been in vain.
In its meeting held on 4th July 2005 the Departmental Representatives stated that it was the inefficiency on the part of the DVB that led to the accumulation of the arrears. If that was the case, why was no action taken during that period. Why did the Government tolerate inefficiency?
This issue again reflects poorly on the maintenance of records by the Delhi Vidyut Board, which has now given an excuse to the DISCOMs to escape their responsibility. The DISCOMs should be penalised for misappropriating the state’s share of the receivables and adjusting it without the approval of the Government. The Government should realistically assess the arrear amount and the DISCOMs should be compelled to take steps to recover these. The Government should revise the terms and conditions in this regard and place checks and balances to ensure that its interests are not adversely affected.
18 Report of the Public Accounts Committee on ‘Privatisation of Power’
As per the written reply submitted by the Department on 4th July 2005 the DVB had managed to recover Rs. 97 crores in March 2001 and Rs.150 crores in June 2002 under special schemes. Besides the above, Rs.100 crores have been directly recovered by DPCL now from DJB, which shows that had these organisations received support earlier they would have performed much better than what the DISCOMs are achieving now. The DISCOMs are pampered with incentives, commissions and support and still the Government is taken for a ride.
The Department has also failed to commit before the Committee a date by which it could quantify the receivables, which it feels, can be realistically recovered. Instead it has been stated that the DPCL has formed Committees for monitoring the progress of the recovery. The Department should quantify the actual receivables within three months and compel the DISCOMs to adhere to the transfer scheme. Around 1200 crores is to be recovered from bulk supply (purchasers above 100 KWs). If the DISCOMs are directed to concentrate on these defaulters a major portion of the outstanding receivables can be recovered.
The CS/Principal Secretary (Power) had admitted that due to inefficiency on the part of DVB, huge arrears had accumulated which the Government is now finding difficult to recover. Strict action needs to be taken against the officers who were at the helm of the affairs of the DVB and DESU. As recommended in the earlier paras the Hon’ble Lieutenant Governor should be requested to entrust the enquiry to an independent investigative agency.
19 Report of the Public Accounts Committee on ‘Privatisation of Power’ 6.14.9 Inviting bids for pre-qualification & 6..14.10 Bids Evaluation (Excerpts from the Report of the C&AG as appearing in the Report for the year ended 2003):
GNCTD had invited Statements of Qualification (SOQ) for selling majority equity of the DISCOMs vide advertisements published on 15 February 2001 through three national/international dailies. The last date for the issue of Request for Qualification (RFQ) document was fixed as 30 March 2001 and the deadline for submission of the SOQ was 16 April 2001, which was extended up to 15 May 2001. Thirty-two companies had purchased the RFQ but only seven companies (six national and one international) had submitted the SOQ along with relevant documents.
The Bids were examined by a core Committee constituted by the GNCTD. One bid was rejected due to violation of conditions of RFQ. GNCTD pre-qualified six companies for the issue of Requests for Proposal (RFP) on the basis of SOQ submitted by them.
GNCTD issued (November 2001) RFP to the six pre-qualified companies. The RFP included the minimum Aggregate Technical and Commercial loss (AT&C) reductions to be achieved each year for the next five years. Only two bidders i.e. Tata Power Co. Ltd. and BSES Ltd. had submitted their bids (10 April 2002). Tata Power Co. had submitted its bid for DISCOM-2 and DISCOM-3 while BSES Ltd. submitted bids for all the three companies. The Council of Ministers concluded (11 April 2002) that the bids were not acceptable “in their present form.” Various new conditions proposed by the bidders along with their bids were also not found to be acceptable. The Council of Ministers authorised (11 April 2002) the Core Committee to explore all other options including negotiations with the bidders before taking any further decisions. The Core Committee decided (April/ May 2002) to negotiate with the bidders. The GNCTD subsequently accepted revised bids from both the bidders viz. BSES Ltd. for DISCOM-1 and DISCOM-2 and Tata Power Co. for DISCOM-3 in May 2002.
It was noticed in audit that the Transfer Scheme along with its specific conditions had been approved by the competent authority viz. the Lt. Governor of Delhi on 12 November 2001. After receipt of the bids, the GNCTD carried out significant modifications and additions in the Transfer Scheme. These were however not submitted to the competent authority for approval.
20 Report of the Public Accounts Committee on ‘Privatisation of Power’ The terms of the Scheme modified/added and their impact are given in the table below: Sl. Clause in original Modifications carried Impact of Modifications No. transfer out after negotiation scheme/policy directions 1. There should be Moratorium on Enhancement of moratorium moratorium for the repayment and interest period will result in depriving first three years on recovery on repayment the Holding Company of both interest and of debt extended to interest amount of Rs. 339.84 principal repayment fourth year and to the crore which would have accrued of the debt of fifth year in case of after the third year. Moreover, Holding Company under-achievement in it enables utilisation of loan by DISCOMs. the fourth year. amount of Rs. 1,416 crore for Thereafter, interest two additional years without was leviable at the interest. rate of 12 per cent. 2. The minimum loss The minimum loss TRANSCO sells power to the reduction levels reduction levels DISCOMs. If the realisation by stipulated in the stipulated in the RFP the DISCOMs is less, then the RFP document document had been amount which is remitted to issued to all changed. TRANSCO by the DISCOMs prospective buyers. would be correspondingly lower. By reducing the loss reduction levels from 20.75 for DISCOM I and 19.25 per cent for DISCOM II & III to 17 per cent for all, TRANSCO is deprived of an accrual of Rs. 3,929 crore. 3. The effect of over- The effect of over This will result in extra burden achievement/ achievement/under- of Rs. 850 crore in the form of Excerpts under-achievement achievement for the support loan to TRANSCO to from for the period 2002- period 2002-03 to 2006- bridge the gap between the C&AG’s 03 to 2006-07 in 07 in the reduction of cost of power and realization Report reduction in AT&C AT&C losses should be there against. Even this support losses should be taken on cumulative of Rs. 3,450 crore was not taken on annual basis till the end of the adequate to compensate for the basis. The support relevant years instead of loss that would be incurred by level of TRANSCO on annual basis. The TRANSCO in view of the was Rs. 2,600 support level was assumption made for increase crore. increased to Rs. 3,450 in consumer tariff every year @ crore. 10 per cent. The average consumer tariff required to be increased would now have to be in the range of 20 per cent to 30 per cent in order to cope with the loss. 4. A mechanism be put in The dues of the Delhi Jal Board Excerpts place to ensure that were a secured debt and such a from DISCOMs receive timely debt should be excluded from C&AG’s payment of electricity the outstanding for calculation Report dues from Delhi Jal Board of collection efficiency. only in respect of HT connections. 21 Report of the Public Accounts Committee on ‘Privatisation of Power’
Government stated (October 2003) that the directions of the Council of Ministers had been adhered to and that the Council had approved the recommendations made by the Core Committee. It was added that such matters did not require the approval of the Lt. Governor as had been advised by the Law Department in another matter.
It was observed in audit that the Transfer Scheme had been framed under the provisions of the Delhi Electricity Reforms Act, which vests the authority to frame the Scheme in the Government. Section 2(d) of the Act stipulates that “Government” means the Lt. Governor of the NCT of Delhi. Hence, any substantial charges in the terms of the transfer scheme should have been re-submitted to the Lt. Governor for approval. The advice of the Law Department cited by the Government did not pertain to the issue of modifications to the transfer scheme. It is suggested that the Government may obtain post-facto approval of the Lt. Governor to the modifications made in the Transfer Scheme.”
REPLY OF THE DEPARTMENT:
In the meeting held on 21st February 2005, the Departmental Representative stated that most of the modifications made after negotiation were part of the Policy Directions issued under Section 12 of the Delhi Electricity Reform Act and not under the Transfer Scheme Rules. It was stated that as per the Law Department’s opinion available at that time the Lieutenant Governor’s approval was not required in such cases.
In its written reply the Department states “certain modifications were carried out in the original package including reduction of Transmission and Distribution Loss targets by the Government. These modifications were made consciously as the option before the government was either to privatise or not privatise at all. In case the government had not privatised, the old legacy of DVB would have continued which was becoming totally unviable and a heavy burden on Government exchequer.
22 Report of the Public Accounts Committee on ‘Privatisation of Power’
FINDINGS OF THE COMMITTEE:
On 15th February 2001 the Department of Power issued an advertisement inviting Statement of Qualifications (SOQ) from investors for purchase of 51% equity in the three DISCOMs viz., South West Delhi Electricity Distribution Company, North-North West Delhi Electricity Distribution Company and Central East Delhi Electricity Distribution Company. ‘Request for Qualification’ (for the purpose of pre-qualifying investors in the first stage of bidding), was sold to the interested parties, which detailed the eligibility criteria and other terms and conditions. Out of the thirty-two companies, which purchased the RFQ, only seven companies (six national and one international) submitted the SOQ.
Of these seven, six were short-listed and in November 2001, the Department issued ‘Request For Proposal’ (RFP) indicating the minimum AT & C loss reduction levels which was to be achieved during the subsequent five years to these six pre-qualified Companies viz., BSES Limited, Reliance Industries Limited, CESCON Limited, Tata Power Company Limited, AES (India) Private Limited and CLP Power International Limited. Out of these six, only two bidders submitted their bids. While Tata Power Company Limited submitted their bid for South West Delhi Electricity Distribution Company and North-North West Delhi Electricity Distribution Company, BSES Limited had submitted their bid for all the three DISCOMs.
Para 19.5 of the RFP stated that: “The bids to be given shall be unconditional. The bids, which are conditional, shall be liable to be rejected.” The use of the words ‘shall be liable to be rejected’ means that the Government is legally obligated to reject the conditional bids.
In Para 19.8 of the RFP it is stated that: “it is a condition of the bid that the bidders accept the documents (including the tripartite agreements and agree to be bound by the terms and conditions therein. Government shall have no obligation to the bidders to discuss or negotiate any agreement or terms thereof either before or after the submission of the bids.” 23 Report of the Public Accounts Committee on ‘Privatisation of Power’
In spite of these provisions, the Government chose to negotiate with the conditional bidders and made drastic changes to suit the needs of the two bidders. Both these bids were conditional and ipso facto they ought to have been rejected as per the provisions of the RFP. In its reply to the Committee the Department stated that as per the guidelines of the Central Vigilance Commission, negotiation could be held only with the H1 i.e. the highest bidder. While it is a fact that as per the CVC guidelines, negotiation could be held only with the highest bidder, but the Department had in fact negotiated with bidders who had submitted ‘conditional bids’ and hence could not be termed as the highest bidders. In other words the negotiation were not held with the highest bidders but with conditional bidders who had violated the conditions of the RFP. The Department had the option to retender after altering the terms and conditions so that the revised terms and conditions were available to all the bidders.
The Principal Secretary (Power) stated in the meeting held on the 10th June 2005 that as per Para 4.2 of the RFP “The Government reserves the right to reject all or any of the bids, if it considers it necessary to do so, and/or to withdraw from the proposed privatization or any part of the process or to vary any of its terms at any time without giving any reason therefore and / or to require bidders to submit revised bids on such basis as the government may determine.”
The consultants (SBI Caps) had suggested the following criteria for selection of private investors:
i. Premium on equity of the Distribution Company (i.e. the bidder who quotes the highest rates for the equity of the distribution company gets declared as the selected bidder). ii. Amount of loan support required in the initial years (i.e. the bidder who quotes the minimum loan support required from the Government is declared as the selected bidder) iii. Bidding on T&D loss reduction and improvements in collection efficiency (i.e. the bidder who assures the highest T&D loss reduction and maximum efficiency gain)
24 Report of the Public Accounts Committee on ‘Privatisation of Power’ SBI Caps recommended the third option and this was accepted by the Government. Hence the bidder who assured the highest ‘AT&C (Aggregate Technical and Commercial Loss) Reduction for each DISCOMs for a period of five years commencing from 2002-2003, was to be identified as the ‘purchaser’. As per the policy directions issued in November 2001 {8(c)} “since the loss reduction or efficiency gain to be achieved by the distribution companies shall be the bidding criteria, the sale of 51% equity shares shall be offered at the face value. The consideration for equity shares will not be a bidding criteria.”
Appendix ‘B2’ of the RFP (Bidding Criteria and Bid Evaluation Para 1.4) stated that: “The AT&C Loss reduction stated by the bidder for any DISCOM for a given year should not be less than the minimum levels stipulated by the government subsequent to the issue of the tariff order for each of the DISCOMs for the year 2001- 2002. The bids are liable to be rejected in case the AT&C loss reduction stated by the bidder is less than the minimum levels stipulated by the Government.”
The minimum AT&C loss reduction targets which was originally stipulated, the original bids which were received and the targets which were finally accepted have been shown below: DISCOM-1 (Central East Delhi Electricity Distribution Company Limited. Now BSES Yamuna) 2002- 2003- 2004- 2005- 2006- Total 03 04 05 06 07 Minimum 1.50 5.00 5.00 5.00 4.25 20.75 levels as per RFP BSES – H1 0.75 1.75 2.50 4.50 4.50 14.00 Initial bid Finally 0.75 1.75 4.00 5.50 5.00 17.00 accepted targets (BSES)
25 Report of the Public Accounts Committee on ‘Privatisation of Power’ DISCOM-2 (South West Delhi Electricity Distribution Company Limited. Now BSES Rajdhani) 2002- 2003- 2004- 2005- 2006- Total 03 04 05 06 07 Minimum 1.25 5.00 4.50 4.50 4.00 19.25 levels BSES – H1 0.50 1.00 2.35 4.50 4.75 13.00 Initial bid Finally 0.55 1.55 3.30 6.00 5.60 17.00 accepted targets (BSES)
DISCOM-3 (North North-West Delhi Distribution Company Limited. Now NDPL) 2002- 2003- 2004- 2005- 2006- Total 03 04 05 06 07 Minimum 1.50 5.00 4.50 4.25 4.00 19.25 levels Tata Power 0.50 1.25 2.00 4.50 5.25 13.50 H1 Initial bid Finally 0.50 2.25 4.50 5.50 4.25 17.00 accepted targets (Tata Power)
Thus the Department compromised on the sole criteria on which the bids were to be accepted in spite of the fact that conditional bids and bids which were lower the minimum level were liable to be rejected.
26 Report of the Public Accounts Committee on ‘Privatisation of Power’
The Government had formed a Core Committee comprising the Principal Secretary (Power), Principal Secretary (Finance) and the Principal Secretary (Planning) to evaluate the bids. On the recommendations of this Committee the council of Ministers in its meeting held on the 11th April 2002 decided that the bids ‘were not acceptable in the present form’ and the various new conditions proposed by the bidders were not found acceptable. The Council of Ministers however, decided to authorize the same officers “to explore all other options including negotiations with the bidders and report back to the Council of Ministers at the earliest before taking any other decisions.” The Minister of Power also made a statement on the floor of the House on the same day in this regard.
Thus the same group of officers who had recommended to the cabinet to not to accept the bids ‘in the present form’ were asked to ‘explore all other options including negotiations’. The Core Committee negotiated with the two bidders and revised bids were received. Even these revised bids were conditional. The conditions of the bidders regarding reduction of AT&C levels, moratorium on repayment and interest waiver, the effect of over-achievement/ under-achievement in reduction in AT&C losses, liabilities arising out of litigation, suits, claims etc were accepted by the Cabinet on the recommendations of the Core Committee.
As per the minutes of the Core Committee the concerns of the Bidders found acceptable were as follows:
“(a) Moratorium on repayment and interest waiver on Holding Company debt to be extended to the fourth year instead of three years in the original structure. In case of underachievement in the fourth year in a distribution company, the moratorium on repayment and interest waiver on Holding Company debt to be increased to fifth year for the relevant distribution company.
27 Report of the Public Accounts Committee on ‘Privatisation of Power’ (b) In regard to over-achievement/under achievement for the period 2002-2003 to 2006-2007 for every year, the cumulative effect till the end of the relevant year should be taken, and appropriate adjustments made. The method of computation and treatment of over-achievement and underachievement shall be as follows: i. In the event the actual AT&C loss of a distribution licensee is better (lower) than the level based on the minimum AT&C loss reduction levels stipulated by the Government the distribution licensee shall be allowed to retain 50% of the additional revenue resulting from such better performance. The balance 50% of the additional revenue from such better performance shall be counted for the purpose of tariff fixation. ii. In the event the actual AT&C loss of a distribution licensee is worse (higher) than the level based on the AT&C loss reduction levels quoted in the bid, the entire shortfall on account of the same shall be borne by the distribution licensee. iii. In the event the actual AT&C loss of a distribution licensee is worse (higher) than the level based on the AT&C loss reduction levelsstipulated by the Government but better (lower) than the level based on the ATC loss reduction levels quoted in the bid, the entire additional revenue from such better performance shall be counted for the purpose of tariff fixation. Provided further that (in fairness to the distribution licensee and the consumer) for every year, the cumulative effect till the end of the relevant year should be taken in regard to over achievement/under achievement and appropriate adjustements made. (c) Liabilities arising out of litigation, suits, claims, etc pending n the date of the takeover and /or arising due to events prior to takeover shall be borne by the relevant distribution company subject to a cap of Rs. 1 crores per annum. Any amount beyond this cap shall be to the account of the Holding Company if the same has not been allowed by the Commission. (d) Till 31st March 2004, the priority of payment fo salary, wages and other statutory payments will rank above the payment due to Transco in the Escrow Arrangements. Other than this, the Escrow arrangements would remain the same as stipulated earlier. (e) A mechanism, be put in place to ensure that the DISCOMs receive timely payment for electricity dues from Delhi Jal Board only in respect of HT connections.” 28 Report of the Public Accounts Committee on ‘Privatisation of Power’ To accommodate the conditions of the bidders amendments were made in the Transfer Scheme Rules, Policy Directions and Contractual documents. However, the approval of the competent authority, which in this case was the Lieutenant Governor, was not sought for making these amendments. The Department claimed that ‘power’ being a transferred subject; the approval of the Lieutenant Governor was not necessary and ‘the cabinet note on the basis of which the policy directions were issued was duly circulated and submitted to the Hon’ble LG before the meeting. Hence, Hon’ble LG was aware of the matter’.
The Department’s view that Lieutenant Governor’s approval was not required for the issue of policy directions cannot be accepted because these directions were issued under Section 12 (1) of the Delhi Electricity Reforms Act, which defines Government as the Lieutenant Governor. Moreover the Department’s contention that the cabinet note was circulated to the LG and he was therefore aware of the issue cannot be accepted because seeking approval/sanction is different from merely informing an authority. When the principal Act, under which the Transfer Scheme Rules and Policy Directions were to be issued, defined the Lieutenant Governor as the Government, his express approval was necessary and in its absence the amendments carried out can be questioned.
It appears that the Government was in such a hurry to privatise the distribution business that it had no time to fulfil the procedural obligations. The Department appeared to be desperate to get rid of the DVB at any cost. It accepted the conditions imposed by the bidders and diluted the bid conditions to suit the bidders’ purpose. The interest of the Government and the consumer was sidetracked.
An important decision, which was not even recommended by the Core Committee but was later, incorporated in the Share Holders Agreement is the issue of APDRP (Accelerated Power Development and Reform Programme) scheme. Under this programme the Ministry of Power, Government of India provided funds for (subsidy and soft loans) for up gradation of sub-transmission and distribution and improvement in commercial viability of State Electricity Boards. On the demand of the DISCOMs the Department agreed to transfer these funds to the DISCOMs as and when received from the Government of India.
29 Report of the Public Accounts Committee on ‘Privatisation of Power’
The Department informed that in August 2003 an amount of Rs. 105.51 crores has been disbursed to the DISCOMs as first tranche (50% loan and 50% grant). The Department has mentioned in its reply that the issue was discussed during the negotiation of the Core Committee with the DISCOMs. However the same did not form part of the recommendation of the Core Committee. It is not clear the compulsions under which the Department agreed to pass on the funds received under APDRP to the DISCOMs. Moreover when the DISCOMs were to receive crores of rupees as grant and soft loan these should have been given weightage while determining the AT&C loss targets. In other words a new source of fund was made available to the DISCOMs in return for which the Government has not received anything.
From the above it is obvious that the process of evaluation of bids was not done in a transparent manner and an arbitrary and selective procedure was adopted in order to suit the needs of the two bidders. The Department accepted conditional bids, changed the conditions of the bids to suit the needs of the bidders, did not seek the approval of the competent authority and passed on added benefits to the bidders, which were not originally planned. Had the revised AT&C loss targets and other relaxations been taken into account initially itself and made known to all the bidders there might have been more positive bids.
Even though, in the meeting held on 10th June 2005 the CS/Principal Secretary (Power) stated there might have been procedural lapses but the intentions were not malafide.
30 Report of the Public Accounts Committee on ‘Privatisation of Power’
The Committee is of the opinion that the members on the core committee bent all rules and in blatant violation of the RFP clauses 19.5 and 19.8, colluded with the business houses, who were bidding for the power distribution business and at their behest made drastic changes in the transfer scheme so as to accrue monetary benefits to the conditional bidders in the long run. The members of the core committee also attempted to undermine the authority of the competent authority (The Hon’ble LG) by seeking a doctored legal opinion from the Law Dept of the Delhi Govt so as to alter the definition of the Government.
The same core committee prior to fixing this deal had opined to the cabinet that the bids being conditional in nature may not be accepted in their present form and by saying that bids may not be accepted in their present form the members of the core committee wanted to retain the handle with themselves and leave enough scope for them to manipulate
In this background the committee feels that all was not above board and it does not rule out the involvement of one or more members of the core committee, in favouring the conditional bidders for monetary considerations by accepting conditional bids and effecting major modifications in the transfer scheme, policy directions and contract agreements without the approval of the competent authority. It is in this background that CVC’s help may be sought to institute an enquiry by a Central Investigation Agency, to ascertain the circumstances that led the members of the core committee to go against the interest of the public exchequer by favouring the conditional bidders.
31 Report of the Public Accounts Committee on ‘Privatisation of Power’ 6.14.11 Stores (Excerpts from the Report of the C&AG as appearing in the Report for the year ended 2003): “According to the Shared Facility Agreement, all material lying in the centralised stores pertaining to distribution functions shall be divided amongst the three DISCOMs in equal share with a right to the DISCOM to adjust amongst themselves the stores based on their mutual agreement. TRANSCO shall bill the DISCOM for these stores on actual cost. According to clause 12 of the SFA, the actual book value of the stores & spares and the loans to personnel as specified in the relevant provisions of the Transfer Scheme shall be determined based on an audit by an independent auditor to be appointed by each DISCOM on the basis of names suggested by TRANSCO. Effort was to be made to complete the whole process within six months of the date of the transfer.
In pursuance of these provisions, M/s T.R.Chadha & Company was appointed as independent auditors. As there was delay on the part of the auditors in furnishing their report, TRANSCO decided in November 2002 to carry out an evaluation of the stores as on 30 June 2002 on actual cost basis in-house. Based on this exercise, TRANSCO raised a bill for Rs. 77.47 crore on 13 March 2003. However, no payment was received. In the meantime, the independent auditors furnished their report on 09 October 2003 wherein the total cost of capital stores was valued at Rs. 87.99 crore in addition to the value of other items including sub-stores of Rs. 15.66 crore.
Audit scrutiny of the valuation done by TRANSCO as well as the report furnished by the independent auditors’ revealed that the scrap/dead items valued at Rs. 2.06 crore lying in the centralized stores as on 30 June 2002 which were also recoverable from the DISCOMs had not been taken into account. Moreover, failure to settle the issue and raise the bill within six months as contemplated in the SFA coupled with failure of the DISCOMs to pay the bill raised by TRANSCO together with non-inclusion of the value of dead items/ scrap has resulted in blockage of funds of Rs. 105.71 crore as well as a consequent loss of interest of at least Rs. 3.48 crore calculated at minimum bank rate of interest of six per cent. Government admitted (October 2003) that there was a delay of two and half months in raising the bills by TRANSCO. However, the DISCOMs raised a legal dispute claiming that the stores covered by the above stated provision of the Transfer Scheme Rules did not include stores that were relatable to capital work-in-progress. The matter was referred to GNCTD on 17/20 June 2003. The matter was resolved and Government decided on 22 October 2003 that stores would include capital works and maintenance works and action was being taken accordingly.” 32 Report of the Public Accounts Committee on ‘Privatisation of Power’
REPLY OF THE DEPARTMENT:
The Department has stated that the matter had been vigorously followed up with the DISCOMs and also discussed in the various meetings held with the DISCOMs from time to time. It further stated that despite Delhi Government’s clarification BSES Yamuna and BSES Rajdhani Power Limited continued to maintain their stand and they are not liable to pay for Capital Stores. NDPL has made part-payment of Rs. 9.24 crore in May 2004 towards Stores. NDPL have further admitted that Rs. 7.26 crore is further payable towards stores.
FINDING OF THE COMMITTEE:
As in the case of ‘receivables’ dealt upon earlier, these observations of the C&AG again throws light on the department not being able to get its due share from the DISCOMs. The very fact that an independent auditor had to be appointed to value the stores of the DVB reflects poorly on the department’s credibility.
In spite of the fact that the independent auditor M/s. TR Chadha & Company had been appointed with the mutual consent of the DISCOMs, the DISCOMs neither agreed to the valuation of the independent auditor nor that of the TRANSCO.
The independent auditors failed to submit his report within the time stipulated. Moreover the auditors failed to account for more than five crores worth of stores and scrap. In spite of these deficiencies the auditor was promptly paid for his services.
33 Report of the Public Accounts Committee on ‘Privatisation of Power’
The Department stated that initially the DISCOMs raised an objection that they were liable to pay only for the revenue stores and not the capital stores. The matter was referred to the Government in June 2003, which issued a clarification in October 2003 (after six months) that DISCOMs are liable to pay for all the Central Stores as per the Transfer Scheme. A bill of Rs.32.64 crores was raised on each DISCOM on 10.12.2004 and they were informed that they would be subjected to payment of penal rate of interest @12% on outstanding dues with effect from 30th June 2002.
In spite of the clarification issued by the Government the DISCOMs have made only part-payment. NDPL has paid Rs. 9.24 crores in May 2004 and admitted that Rs. 7.04 crore is further payable towards stores (i.e. Rs. 16.28 out of the billed amount of 32.64 crores) while BRPL and BYPL had made payment of only Rs. 7.05 crores each (i.e Rs. 14.10 out of the billed amount of 32.64 crores each) in May 2005. The Department has stated that efforts are being continued to recover the payments due from the DISCOMs. On the one hand the Government appears to be liberal whilst disbursing payments to the auditors and DISCOMs and when it is the turn of the Government to recover its dues it has failed to do so. The Government appears to be dancing to the tunes of the DISCOMs.
The Department is directed to recover the balance amount from the DISCOMs along with the penal interest immediately. The balance payment of Rs.6.32 crores, which has been admitted by the NDPL, has been allowed to be adjusted against the APDRP funds to be released. If the payment due from the DISCOMs can be so adjusted the Government should adjust the whole balance amount and penal interest from the APDRP funds, which is to be released in the future.
34 Report of the Public Accounts Committee on ‘Privatisation of Power’ Bulk Supply Agreement Para 6.14.12 Rebate (Excerpts from the Report of the C&AG as appearing in the Report for the year ended 2003): “According to Article 5 of the Bulk Supply Agreement signed by TRANSCO with the three DISCOMs, TRANSCO shall from the month of the date of the transfer intimate through four monthly invoices the amounts payable by the DISCOMs to TRANSCO for energy charges which shall become payable on the date falling 20 days after the date of delivery of such invoice. After the first four monthly invoices, the DISCOMs shall start releasing the payments to TRANSCO without waiting for the monthly invoice. It is specifically stipulated in clause 5.2(d) that the DISCOMs shall pay the full amount to TRANSCO without deduction, set-off or withholding on any account whatsoever unless otherwise agreed upon. Where the DISCOMs make payment in full before the due date, TRANSCO shall allow a rebate of 2.5 per cent in accordance with the provisions of the Bulk Supply Tariff. It is also stipulated, that in case the DISCOMs fail to pay the amounts due to TRANSCO on or before the due date of payment; then for the period of delay, the DISCOMs shall be required to pay a Late Payment Surcharge (LPSC) at a rate equal to 2.5 per cent per month on the amount delayed.
It was observed in audit that excess rebate was being calculated and deducted by the DISCOMs resulting in short payment of bills. The total amount of excess rebate recoverable from the DISCOMs worked out to Rs. 33.31 crore for bills raised during July 2002 to April 2003. On it being raised in audit in March 2003, TRANSCO recovered Rs. 9.48 crore and adjusted Rs. 18.29 crore against the grant/loan payable to the DISCOMs under the Accelerated Power Development Reform Programme (APDRP) on 12 September 2003. The balance amount of Rs. 5.54 crore had not been recovered (September 2003). TRANSCO had also failed to levy LPSC amounting to Rs. 6.80 crore for the period from August 2002 to September 2003 with the DISCOMs on short payment of billed amount.
Government stated (October 2003) that the DISCOMs were regularly making payment of monthly bills and that there was no delay in receipt of payment from them. In cases where it was noticed that the rebate claimed was more than what was admissible, the DISCOMs had been asked to refund the excess rebate and the same had been recovered. Levying of 2.5 per cent LPSC on an incorrect rebate calculation which resulted in full cancellation of Excerpts rebate for that particular month would have amounted to double penalty. The from C&AG’s reply of the Government is not tenable as rebate was an incentive or benefit Report granted for early payment of the billed amount and cancellation of the same
35 Report of the Public Accounts Committee on ‘Privatisation of Power’ for failure to remit the full amount by the stipulated date was not a penalty. It was only rectification of an error in allowing an incentive which was actually not due. Further, rebate was to be granted only after full payment was received by TRANSCO from the DISCOMs who were to remit the amount due from them without making any deductions. Deduction of excess rebate amounted to short payment of dues. LPSC was a penalty to be levied on the buyer for default in timely payment of full amount due. Hence, cancellation of rebate and levying of LPSC were two entirely different issues and in the instant case, levying of LPSC cannot be treated as double penalty as cancellation of rebate was clearly not a penalty. Hence, incorrect and arbitrary deduction of rebate by DISCOMs amounted to short payment of their monthly dues attracting levy of LPSC. Government informed audit in December 2003 that TRANSCO had since filed a petition in DERC on 26 December 2003 against the DISCOMs for excess reduction of rebate as well as for levy of LPSC for the short payment of dues.”
REPLY OF THE DEPARTMENT:
Vide its reply dated 4th July 2005, the Department has informed that the matter had since been decided by the Delhi Electricity Reforms Commission and as per the Order of the Commission the following payments were due from the DISCOMs in the matter of adjustment of rebates: (Amount in crores) DISCOMs Billed Payment Rebate Rebate Excess amount received claimed admissible (+)/ by as per Short (-) DISCOMs DERC orders Payments BYPL 1329.85 1324.23 6.03 2.36 -3.25 BRPL 2504.04 2493.67 11.30 3.89 -6.39 NDPL 1710.75 1704.38 1.06 6.67 +0.31
As per the DERC order an amount of Rs. 31 lakhs was to be paid to NDPL, which the Department has stated that it has adjusted in the Bill for April 2005. An amount of Rs. 6.32 crores that had not been released to NDPL under the APDRP scheme has now been adjusted for outstanding amount against stores (Para 6.14.11). 36 Report of the Public Accounts Committee on ‘Privatisation of Power’ The Department has stated that as BRPL and BYPL have disputed the computation of rebate as per the DERC order and have again approached the DERC for further orders, action can be taken only after DERC gives its verdict on the petition.
FINDINGS OF THE COMMITTEE:
The Department raised the claim of excess rebate only after the C&AG’s audit party pointed it out in March 2003. The matter was taken to DERC in December 2003 and was decided in July 2004. As the DERC has not allowed any LPSC, penal provisions or interest, the Department has suffered losses for not being more vigilant in enforcing the terms of the Bulk Supply Agreement. It appears that TRANSCO officers have still not learnt the lesson from the deterioration of DVB and have allowed the DISCOMs to take advantage on some pretext or the other. Strict disciplinary action is to be taken against the officers of the TRANSCO who allowed the adjustment of rebate in the first instance and did not take corrective action till it was pointed out in audit. In an interesting interpretation of the bulk supply agreement the DERC has directed that, as procedure of payment of rebate was not mentioned in the Bulk Supply Agreement therefore, “rebate if admissible would be adjusted in the last instalment of the month. In case additional money is due to the DISCOMs even after adjustments at the time of the last instalment, TRANSCO will arrange to make the payment on the very next day. Any delay on the part of TRANSCO shall invite a penal charge of 2.5% per month of the amount in question.” Thus TRANSCO will have to pay penal interest if it does not calculate the rebate due to each DISCOMs and make the payment within a day. The department has not indicated whether the DERC order in this regard has been appealed against. The Department is dragged to the Commission by the DISCOMs whenever their interests are affected whereas the Department does not feel it necessary to protect its interests whenever adverse orders are passed against it. The department should act more promptly and be more vigilant with regard to its approach such cases and should take all remedial steps at its command to avoid any embarrassment or loss to the exchequer.
37 Report of the Public Accounts Committee on ‘Privatisation of Power’ 6.14.13 Aggregate Technical and Commerial Losses (Excerpts from the Report of the C&AG as appearing in the Report for the year ended 2003): “Aggregate Technical and Commercial Loss (AT&C) is the difference between units put into the system and the units for which the payment is collected. At the time of the RFP, the total AT&C losses were to be reduced by 20.75 per cent for DISCOM I and 19.25 per cent for DISCOMs II and III. At the time of the Share Acquisition Agreement, consideration of collection efficiency was included in the calculation of AT&C and requirement for reduction in AT&C losses was diluted to 17 per cent over a period of five years. One of the primary objectives of privatization of distribution was to reduce non – technical losses. The total non technical losses are estimated by reducing from the total AT&T losses the technical loss and collection efficiency. The technical loss allowed by the DERC and the technical consultant (TCE) along with collection efficiency was as follows (Figures in percentage) Particulars Technical Losses Total Total Allowed technical AT&C Sl. losses losses to No. By Tata by allowed be Consultancy DERC to reduced Engineers (TCE) DISCOMs 1. Losses at 220 KV to 66 KV 1.47 - 1.47 17 2. Average loss at 66 KV to 11 1.36 6.20 6.20 - KV 3. Losses below 11 KV in the 5.85 - 5.85 - distribution system 4. Total 8.68 6.2 13.52 17 5. Less loss to be reduced by 1.25 - - - 1.25 per cent during five years by installing capacitors 6. Total 7.43 7. Losses on account of - 5.11 5.11 - collection efficiency 8. Total losses on account of - - 18.63 - technical loss and collection efficiency 9. Technical losses and - - 11.20 11.20 collection efficiency allowed (18.63 – 7.43) 10.Non -technical loss to be - - - 5.80 reduced during five years (17-11.20)
38 Report of the Public Accounts Committee on ‘Privatisation of Power’
Audit scrutiny revealed that if we consider the collection efficiency along with only the technical losses as allowed by the DERC and the technical consultants, the loss on these two factors viz. technical loss and collection efficiency was 18.63 per cent. Taking into account the acceptable technical loss of 7.43 per cent, the total extra loss allowed to the DISCOMs on account of technical loss and collection efficiency was 11.20 per cent. The non- technical loss viz. primarily theft reduction and misuse which was one of the primary objectives of privatization was thus only 5.80 per cent in five years viz. 1.16 per cent per year as against 3 per cent per year on an average envisaged in the RFP. This resulted in a significant dilution of the loss reduction targets as originally envisaged in the RFP.
The Government stated (September 2003) that reduction of technical Excerpts losses below 11 per cent was virtually impossible since during the next five from C&AG’s years the size of the system would expand and the cost of improvements, Report which could reduce the technical loss level, was very high to the point that it was not always regarded as cost effective.
The reply was scrutinised in audit. It was seen that the figure of acceptable technical loss was only 7.43 per cent as per the technical consultant’s report and ranged between 8.04 and 5.80 for the different circles according to the SBI CAPs Report. The figure of reduction of AT&C loss envisaged in the RFP was by 20.75 per cent for DISCOM I and 19.25 per cent for DISCOMs II and III. The opening loss was 57.20 per cent for DISCOM I and 48.10 per cent for DISCOMs II and III. Since the technical losses cannot be reduced beyond 11 per cent as stated by Government, the stipulated loss reduction can be achieved only by reducing the losses on account of collection inefficiency and non-technical losses. Loss on account of collection inefficiency as 5.11 per cent which was to be reduced to zero over a five-year period. Deducting this from the total loss reduction to be achieved, the total reduction to be achieved on account of non-technical loss worked out to 15.64 for DISCOM I and 14.14 per cent for DISCOMs II and III over a five year period against 5.80 per cent arrived at after taking into account the technical consultants losses and transmission loss allowed by DERC to the DISCOMs. The level of loss reduction targets envisaged in the RFP should have been ensured. Failure to do so may have an adverse impact on tariffs.
39 Report of the Public Accounts Committee on ‘Privatisation of Power’
Government added in December 2003 that the change in loss reduction targets only meant enhancement of the level of Government assistance from Rs. 2,600 crore to Rs. 3,450 crore and was tariff neutral. It re-iterated that the choice was between raising the assistance to this level or not privatising at all.”
FINDINGS OF THE COMMITTEE:
The effect of the dilution of AT&C losses target has been dealt with extensively in Para 6.14.10 (Bids Evaluation). As observed in the C&AG’s Para the non-technical losses (primarily losses due to theft and misuse) which was to be achieved by the DISCOMs worked out only to 5.80 percent in five years or 1.16% each year, as against the average figure of 3% that was to be achieved as per the RFP. The C&AG’s Report had also mentioned that failure to adhere to the loss reduction targets envisaged in the RFP might have an adverse impact on tariffs.
The apprehension of the C&AG has been proven correct by the recent events. In its reply to the audit the Department has stated that reduction in loss reduction target only meant enhancement of the level of Government assistance and there would be no adverse effect on the tariff. The contention of the department has been proved wrong. The Government not only increased the support to TRANSCO and provided subsidies but also had to agree to hike the power tariff. The Department should ensure that the increase in the support to the TRANSCO and frequent hikes in tariff be avoided as far as possible so that it does not result in the burdening of the consumer. So far it has been observed that the ultimate burden either on account of increasing support or increasing tariff has fallen on the consumer.
40 Report of the Public Accounts Committee on ‘Privatisation of Power’
CONCLUSION:
All wielders of public power must remember that they are a fiduciary for public and therefore the great words of Disraeli apply to all: “I repeat…that all power is a trust-----that we are, accountable for its exercise-----that from the people and for the people, all springs and all must exit”
The Committee after having gone through all the documents pertaining to privatisation of power feels that extensive consultations should have been held with a cross section of the public before undertaking power reforms; a sensitive issue that affects millions and millions of consumers. All through the privatisation process the committee observed that there has been confusion of vision on the part of the decision makers. The Committee is not against the electricity reforms per se; but it is not satisfied with the manner in which the process of privatisation was hurried through.
In its ‘Strategy Paper on Power Sector In Delhi’ the Department identified the following issues responsible for the sorry state of affairs in the DVB: . No new capacity addition . Increase in T&D losses . Neglect of maintenance . Increase in operating losses; and . Increase in the money due to DVB
It appears from the strategy paper as though the Department was commenting on some entity on which it had no control. The Department was aware of the ills, which plagued the DVB, and instead of suggesting measures to improve these it opted for privatising the Board as an escapist measure. The Department either did not have the will or had some vested interest in allowing the privatisation at the cost of the common man.
41 Report of the Public Accounts Committee on ‘Privatisation of Power’ Brief Summary of the Committee’s recommendations on the C&AG’s Report:
1. Para 6.14.6 Appointment of Consultant for Re-structuring: In the matter of appointment of consultants all the guidelines of the CVC were flouted and the Department appointed a consultant unilaterally without inviting tenders. The fact that the minimum AT&C loss levels (the basic criteria for selection of bidder) as recommended by the consultant were not matched in the bids, reflects poorly on its recommendation. The Committee feels that responsibility of the Officers concerned needs to be fixed. The Hon’ble Lieutenant Governor may be requested to refer the matter to the Central Vigilance Commission for a thorough probe to determine the complicity and motive on the part of the officials involved in the whole exercise of appointment of the consultants, which to this committee seems to have been done in an indecent haste by flouting the guidelines of the CVC in this regard.
2. Para 6.14.7 Valuation of Assets: The valuation of assets in the absence of proper records such as audited balance sheets, fixed assets register, inventory of stocks of the DVB is questionable. In the absence of proper records the consultant’s computer model of business valuation methodology contained approximate conclusions based on assumptions and weightages which were not objective. During the presentation before the committee, the consultants had no proper justification for the basis on which the final figures were calculated. The genesis for this problem was the callous manner in which the accounts of the Delhi Vidyut Board had been maintained.
Prime land costing several thousand crores in Delhi has been handed over to the DISCOMs for a license fee of One Rupee per month for a period of 25 years which is nothing but pittance with no legal safeguards to prevent the afore said land being commercially exploited by the DISCOMs. The government in its agreement and the DERC in its license should have clearly stated both in terms of minimum percentage and quantum of distribution business that the DISCOMS are supposed to carry out from the afore said land. 137 Grids costing around 1200 crores and Ten thousand transformers costing around 500 crores have also been transferred to the DISCOMs on lock stock and barrel basis. With all these assets that stand transferred to DISCOMs as of Prime land costing several thousand crores in Delhi has been handed over to the DISCOMs for a license fee of One Rupee per month for a period of 25 years which is nothing but pittance with no legal safeguards to prevent the aforesaid land being commercially exploited by the DISCOMs. The government in its agreement and the DERC in its license should have clearly stated both in terms of minimum percentage and quantum of distribution business that the DISCOMS are supposed to carry out from the
42 Report of the Public Accounts Committee on ‘Privatisation of Power’ aforesaid land. 137 Grids costing around 1200 crores and Ten thousand transformers costing around 500 crores have also been transferred to the DISCOMs on lock stock and barrel basis. With all these assets that stand transferred to DISCOMs as of Government of Delhi could have got a better bargain for the consumers in the form of lower tariffs and better service.Government of Delhi could have got a better bargain for the consumers in the form of lower tariffs and better service.
In the matter of valuation of assets it is pertinent to note that the DISCOMs are a commercial organisation with profit as their motive in the power business. They are surely not here for charity, then why did the Govt decide to give prime land in Delhi, costing several thousand crores at a nominal licence fee of Rs 1 per month and that too for twenty five years. The terms used for revocation of licence like authorisation and sanction have no legal sanctity and have been used to confuse public mind. Why should the Government forget that DISCOMS are majority stakeholders with 51% equity in the business of power and they are here to stay? As per the terms of agreement, it has already been agreed up on by the Govt that DISCOMs can increase their share in due course of time.
In the matter of valuation of assets it is pertinent to note that the DISCOMs are a commercial organisation with profit as their motive in the power business. They are surely not here for charity, then why did the Govt decide to give prime land in Delhi, costing several thousand crores at a nominal licence fee of Rs 1 per month and that too for twenty five years. The terms used for revocation of licence like authorisation and sanction have no legal sanctity and have been used to confuse public mind. Why should the Government forget that DISCOMS are majority stakeholders with 51% equity in the business of power and they are here to stay? As per the terms of agreement, it has already been agreed up on by the Govt that DISCOMs can increase their share in due course of time.
The genesis for these problems of under valuation can be traced to the callous manner in which the accounts of the Delhi Vidyut Board had been maintained. The entire system lacked supervision and accountability. The Hon’ble Lieutenant Governor be requested to order an enquiry by the Central Vigilance Commission
43 Report of the Public Accounts Committee on ‘Privatisation of Power’
3. Para 6.14.8 Outstanding Receivables of DVB: In the matter of ‘outstanding receivables’ the Department has failed to quantify the amount, which it feels, can be realistically recovered even after three years of privatisation. The Government seems to have succumbed to the whims of the DISCOMs in matters of collecting its dues. Not only were the DISCOMs allowed to sit on the funds of the Government but also allowed to make adjustments without the prior approval of the competent authority. Department should quantify the actual receivables within three months and compel the DISCOMs to adhere to the transfer scheme. The CS/Principal Secretary (Power) had admitted that due to inefficiency on the part of DVB, huge arrears had accumulated which the Government is now finding difficult to recover. Strict action needs to be taken against the officers who were at the helm of the affairs of the DVB and DESU. As recommended in the earlier paras the Hon’ble Lieutenant Governor should be requested to entrust the enquiry to CVC.
4. Para 6.14.9 Inviting bids for pre-qualification & 6.14.10 Bids Evaluation: As mentioned earlier, the process of evaluation of bids was seriously flawed and major changes in the RFP, Transfer Schemes and Policy Directions were made without the approval of the competent authority, to suit the needs of the two bidders. Instead of rejecting the conditional bids outright, the Department chose to enter into negotiations with the bidders. Going through the initial bids and revised bids submitted by the bidders it is obvious that the negotiations were more in the nature of directions issued by the bidders rather than negotiations. The Core Committee acceded to all the major concessions sought by the bidders and instead of addressing the concerns of the Government and consumer it appeared to be more concerned of the interests of the bidders. The language of the modifications recommended by the Core Committee is more or less identical to the conditions imposed in the bids. The Committee is firm in its view that had the revised conditions and liberal concessions (lower AT&C targets, increase in moratorium period, cap of one crore on account of liabilities, funds under APDRP etc.) be made public at the time of issue of bids, more bidders would have entered into the fray.
5. Para 6.14.11 Stores & Para 6.14.12 Rebate: In these matters also the Department appears to be captive to the dictates of the DISCOMs. They have failed to ensure that the DISCOMs adhere to the Transfer Scheme and other agreements, which were mutually agreed upon. Amongst the three DISCOMs, NDPL appears to at least have some sense of responsibility towards the dues of the Government. On the other hand BRPL and BYPL have defaulted in each of the above-mentioned cases and delayed payments on one pretext or other. Strict disciplinary action is to be taken against the officers of the TRANSCO who allowed the adjustment of rebate in the first instance and did not take corrective action till it was pointed out in audit. 44 Report of the Public Accounts Committee on ‘Privatisation of Power’ It appears from the records that the Department of Power in a clandestine manner doctored the legal opinion to regularise its malafide act of effecting sweeping changes in the Transfer Scheme Rules, Policy Directions, Bid Documents and Contractual agreements, without the approval of the competent authority i.e. the Lieutenant Governor, to suit the needs of the DISCOMs. Moreover had the department shown such a haste and efficiency in controlling the rot in DVB there might not have been a need for privatising at all. With the amount of support and subsidy and at the present rate of tariff hike, sincere efforts could have been made to revive DVB. The following illustration shows that DVB could have been made profitable over a period of five years, given the same amount of assistance, which has been extended to the DISCOMs: Rs. In crores Loss as per DVB accounts for the year 2001-2002 1204.79 Therefore Loss for five years as per the projections (1204.79 x 5) 6023.95 Revenue to be realised by increase of tariff (by 10% each year) Rs. 6014 (As per DERC orders 10% increase in tariff will lead to increase of 376 crores in the third year.hence 376 has been taken as average) I year – 376 II year – 752 (+37) III year- 1128 (+75) IV year – 1504 (+112) V year – 1880 Total 5649 + 375 = 6014 Less loss targets to be achieved from projection made by DVB in Rs. 2400 crores. the year 2000-2001 @ 2% each year. (Opening level of T&D loss in 2000-2001 at the time of finalisation of Report of SBI Caps was 61 %; while at the time of handing over it was 58% as per calculations of DERC i.e. DVB had managed to achieve 3% loss reduction) 1% of T&D loss amounts to Rs. 80 crores. Thus by achieving 2% T&D loss each year the DVB would have gained: I year (2x80)= Rs. 160 crores II year =320 crores III year= 480 IV year=640 and V year=800 Total=2400 crores Total extra expenditure 3607.54 (Amount of Regulatory Assets created= Rs. 548 crores Support loans to TRANSCO-3450 crores Subsidy under APDRP-105.52 crores Other subsidies for domestic consumers given in 2003-2004=52.02 crores) 12569.54 Less Loss as per DVB accounts for the year 2001-2002 6023.95 Surplus 6545.59
Thus with efficient management the DVB could have been put back on track and would have been earning profits. 45 Report of the Public Accounts Committee on ‘Privatisation of Power’ On 1st July 2005 the Committee requested the Chairperson (NDMC) to give a brief presentation of the power scenario in the NDMC area. The Committee was pleased to note that the NDMC authorities had been able to do a commendable job in the matter of tariff realisation, lowering AT&C losses and installation/ maintenance of its assets. The performance was much better than the DISCOMs. The revenue realisation was 95% and AT&C losses were 16%, which was among the lowest in the country. The performance of NDMC shows that with proper management and support even the Government agencies could perform better than the private DISCOMs.
The Department did not consider the option of privatisation in stages or managing the affairs of DVB more efficiently. It could have allowed the DISCOMs to be run as public sector undertakings for the initial years. Professional expertise and technology should have been infused into the system and after evaluating the performance the Government could have taken the decision to hand over the DISCOMs to private hands. The objectives of privatisation could have been better achieved had the officers been made accountable for their performance. As the officer was aware that he was not going to be questioned for the losses of the DVB he could escape with negligence and inefficiency.
46 Report of the Public Accounts Committee on ‘Privatisation of Power’ The Committee would also like to Even now the performance of Government companies viz., TRANSCO, GENCO, DPCL etc., are not up to the mark. The Committee observed that a single officer was managing more than one company. The Government should utilise the services of experienced professionals and technocrats to manage the affairs of the Government companies and make them accountable for the performance of the companies.
The Government nominees to the Board of Directors in the DISCOMs should also be experts who can safeguard the interest of the Government and the consumer and they should be accountable for their performance. The Hon’ble Lieutenant Governor should be requested to appoint separate Directors preferably professionals in all the three DISCOMs and the Government Companies like GENCO and TRANSCO. Such appointees should not be burdened with the responsibility of more than one company. The Committee would like to express its concern on media reports and surveys conducted by various agencies, which have time and again pointed out, that the consumer is not impressed by the performance of the DISCOMs. The Central Electricity Authority has also ranked the DISCOMs of Delhi poorer than the national average.
ROLE OF DERC: The Committee observed that the DERC (Delhi Electricity Regulatory Commission) over a period of time seems to have lost its independence, autonomy and credibility. Rather than safeguarding the interest of the consumers at large it has acted as a hidden hand of the Government and the DISCOMs. The Standing Committee of the Parliament on Energy has also passed severe strictures against the working of the DERC and DISCOMs.
The following lines come to mind on seeing the plight of the consumer: “Can I see another’s woe, And not be in sorrow too Can I see another’s grief? And not seek for kind relief On another’s sorrow”
The consumer has to suffer power cuts, low voltage and exorbitant bills. The tariff hike has become an almost annual affair for him. The 47 Report of the Public Accounts Committee on ‘Privatisation of Power’ Government extended a subsidy for select category of consumers as a temporary relief only to later withdraw it. The complaint of erratic meters is widespread with no relief in sight. The Government should constitute a technical committee of experts (preferably from IITs) to look into the issues. Standardised meters manufactured by reputed companies should be made available and the consumer should have the option to select the one, which he prefers. The provisions of the Transfer Scheme Rules, Policy Directions, various agreements and the manner in which the DISCOMs are reacting to the Government directions creates a serious apprehension that in spite of holding 49% equity the Government has lost control of the distribution business. No checks and balances have been placed to ensure accountability of the DISCOMs. As has been brought out in the Report in almost all the issues the Government has to depend on the DISCOMs version and interpretation for receiving its dues.
48 Report of the Public Accounts Committee on ‘Privatisation of Power’ The Honourable Lieutenant Governor may be requested to direct for a thorough audit (including physical audit) of the billing software system and the entire accounts of the DISCOMs (since their inception) by independent auditors like the Institute of Chartered Accountants of India. At present there is no mechanism to ensure that the DISCOMs have made the necessary investments, utilised the APDRP funds diligently, achieved the loss targets or accounted properly for the Government dues in matters of recovery of arrears, stores etc. The independent auditors should be entrusted with the responsibility of ensuring the compliance of the DISCOMs in these areas also. The Hon’ble Lieutenant Governor be requested to order an enquiry by the Central Vigilance Commission in to the conduct of all those top officials, who managed the erstwhile DVB in the last three years prior to privatisation, for their acts of criminal breach of trust, dereliction of duty, negligence and lack of supervision on their part. They had failed to ensure proper maintenance of audited books of accounts, asset registers, inventory of stocks etc. This gross act of negligence has cost the exchequer several thousand crores since in the absence of all these vital records the government was forced to accept the asset valuation done by the sole consultant and property of the erstwhile DVB running into several thousand crores was transferred to the DISCOMs for pittance. This action at this stage is of paramount importance so that it acts as a deterrent for the other Heads of other commercial undertakings of the Government. The Hon’ble Lieutenant Governor should be requested to get the role of all those officers investigated by a Central Investigation Agency who were involved in the screening of bids, effecting changes in the transfer scheme, and the final negotiations with the conditional bidders without the prior approval of the Competent Authority..
Delhi (Dr. SC Vats) September 2005 Chairman Public Accounts Committee Delhi Legislative Assembly
49 Report of the Public Accounts Committee on ‘Privatisation of Power’ Annexure-1
“What Mr Arun shourie has to say about PAC report on privatisation of power “
PART-I
Accountability, my foot – Arun Shourie Indian Express 29th September 2005. The draft of the PAC’s report on the Delhi Vidyut Board privatisation not only reveals shocking facts but also gives a frightening glimpse of how officials and their patrons spin their webs
Having seen the mysterious things that happened along the way while the Delhi Government was privatizing power distribution — how the Delhi Government’s guarantee to the private companies that they would be ensured a ‘‘minimum 16% return’’ had become a ‘‘minimum 16% POST TAX return’’; how in the valuation exercise the figure used for a single item — what the companies could collect from consumers — differed from the actual figure by Rs. THREE THOUSAND ONE HUNDRED AND SEVEN CRORE; how stores worth a hundred crores or more were handed over without a paisa; how the targets on which the bids had been invited were changed behind the back of other bidders; how, after the bids had been rejected, massive concessions were given in ‘‘private negotiations’’; how the decision was deliberately taken to keep those massive concessions from the only authority who could authorize the changes — having studied the records relating to all this; having seen too how the CAG’s office had joined in covering up the malfeasance of the worst degree, I wrote as an MP to the Prime Minister — he is known for his integrity after all, and papers have been carrying plants about his determination to ensure honesty and accountability. Though all of us take him to be more committed to honesty in the conduct of public affairs than run-of-the-mill Prime Ministers, he wrote back exactly as run-of-the-mill Prime Ministers would! ‘‘Dear Shri Shourie, I have received your letter of September 2, 2005 requesting investigation by CBI into the privatization of the Delhi Vidyut Board. With regards...’’ End of matter!
I wrote next as an MP to the guardian of our country’s exchequer — the Finance Minister. Though the guardian of our country’s finances, and though as committed as anyone else to ensuring that not a paisa of public money shall be wasted, he wrote back exactly the way any Section Officer would. ‘‘Please refer to your letter dated... I have had the matter examined and am informed that Department of Disinvestment was not associated in this transaction. Your letter is, therefore, being referred to the Union Ministry of Power for appropriate action’’. The file had thus been sent on a round! Indeed, it had been sent to the very department which had been involved in bits of this exercise where it will be ‘‘processed’’ by some of the very officers who had been involved in the original discussions leading to the final deals with those private companies.
But not all was lost. Reports of the CAG are supposed to be processed by the Public Accounts Committee of the relevant legislature. And I had been told that the PAC of the Delhi Assembly was deliberating over the CAG’s cover-up report on the DVB privatisation.
50 Report of the Public Accounts Committee on ‘Privatisation of Power’ The Draft of the PAC’s report was finalised. The Chairman, Dr. S.C. Vats, had approved the text. Suddenly, the Congress-I blocked the report. The Chairman, himself from the Congress-I, has been constrained to resign. Papers carried extracts from the Draft. I requested The Indian Express to send me a copy of what they had received. Even before that could arrive by the evening, a person in public life brought me a copy — Ajee, yeh to mithai jaise baanti jaa rahi hai, DPCC mein,’’ ‘‘My friend, this is being distributed as sweets in the DPCC,’’ the Delhi Pradesh Congress Committee. That is how truth breaks out — with persons inside unbolting some little roshandaan!
What does the Draft Report indicate? As you will see, it reveals not just facts about the privatization per se — shocking as these are - it gives us a frightening glimpse of how officials and their patrons — inside governments and outside — spin their webs; and of the nonsense and falsehoods by which officials and governments, and the puppeteers behind the curtain, seek to confound bodies like the PAC. Second, now that the Chairman of the Delhi PAC has had to resign, and the Draft is certain to be killed, is it the end of the road, or can anything still be done?
It turns out that the PAC had deliberated with considerable diligence on the facts that even the CAG had ben constrained to record. It had weighed them, and taken evidence from officials and the consultant at eight full sittings — in February, May, June and July 2005. What it found compelled the Chairman and those who prepared the Draft to record the most damning conclusions, and to make the most far-reaching recommendations.
Selecting the convenient guide
Guidelines issued by the Chief Vigilance Commission as long ago as 1983 state that ‘‘a public notice should be issued to enlist names of suitable consultants’’. The CVC reiterated these to even stronger effect in November 2002. The Commission noted, ‘‘The consultants are still appointed in an ad hoc and arbitrary manner without inviting tenders and without collecting adequate data about their performance, capability and experience. In some cases, the consultants were appointed after holding discussions with only one firm without clearly indicating the job content and consultation fee payable to them. Often the scope of the work entrusted to the consultants is either not defined properly or the consultants are given a free hand to handle the case due to which they experiment with impractical, fanciful and exotic ideas resulting in unwarranted costs. The organizations display an over-dependence on consultants and invariably abdicate their responsibility completely to the latter. The officials do not oversee the work of the consultants resulting in the latter exploiting the circumstances and at times, in collusion with the contractors, give biased recommendations in favour of a particular firm... The Commission would like to reiterate the instructions regarding appointment of consultants... The selection of consultants should be made in a transparent manner through competitive bidding. The scope of work and role of consultants should be clearly defined’’.
Those are the CVC’s guidelines. But in fact, its description in that passage of what is wrong turns out to be an exact account of what the officials and Government of Delhi did in selecting one particular organization for the DVB privatization. They did not specify the work the consultant had to do. And then, the Draft Report concludes after recording the shameful sequence, “as is obvious, the Department [Delhi Government’s Department of Power] instead of opting for an open tender, contacted these consultants [the three 51 Report of the Public Accounts Committee on ‘Privatisation of Power’ contenders] selectively at various stages, with different requirements’’. This device ensured that they could rule out whom they wanted, and select whom they wanted — as no two proposals could be compared!
When the PAC asked the Delhi Government officials how one of the potential candidates — the Administrative Staff College of India, Hyderabad — had been excluded, they said that it had withdrawn on its own. The PAC Draft reproduces letters from the head of the College which clearly show that the ASCI withdrew because the Delhi Government had already decided that it would be assigning the work to another contestant! In the case of another contestant which too was ruled out, the ICICI, the Delhi Government officials asserted that this was done as its record in the privatization of Electricity supply in East Delhi had been a failure. But the reason for this, the Draft records, was that the accounts and records of the DVB ‘‘were in a sorry state,’’ including the fact that there was absolutely no Fixed Assets Register. ‘‘In such a situation,’’ the PAC Draft records, ‘‘the consultant cannot be blamed for a lapse on the part of the Department. Similarly, if a state chooses to not act upon the report of a consultant, it cannot be claimed as a reflection on the performance of the consultant’’. Nor was that all. The Delhi Government officials tried to pass off another explanation for excluding this candidate — there was no question of considering the ICICI, as it had closed its consultancy wing, they told the PAC. The PAC made some inquiries. And, lo and behold, it transpired that the wing was closed later! That it was very much in existence at the relevant time!
Conclusion of the PAC Draft? ‘‘The Department had thus faied to adhere to the prescribed financial procedures as well as the guidelines of the CVC... The matter may be referred to the Central Vigilance Commission for a thorough probe to determine the complicity and motive on the part of the officials involved in the whole exercise of appointment of the consultants...’’
‘‘The magic figure of Rs. 3,160 crore’’ Recall that the whole service was valued to be worth no more than Rs. 3,160 crore, and recall too the lesson that Jagdish Sagar tried to teach me regarding this figure in this paper. Remember for a minute that this very officer was in-charge of the DVB in the years before its privatization. Now, see what the PAC Draft records.
As the CAG had done, the PAC Draft raises the most serious doubts about the valuation of DVB operations on the basis of which they were handed over to the private companies. To one and every query, the Delhi Government’s officials had a stock answer — no records of the assets of DVB were available! But whose responsibility was it to have maintained the account books? Of Jagdish Sagar and company, for he was the head of DVB at the relevant time! But their not having done their job became the excuse for doing what they wanted to do for other reasons!
‘‘The Department’s admission that the DVB’s Asset Register was not complete,’’ records the PAC Draft, ‘‘indicates a very serious lapse on the part of the officers manning the erstwhile DVB. It is surprising that the Department has not found it fit to seek the reasons for this lapse. Instead it chose to gloss over it and adopt the easiest way out. The statement that the Department had no idea of its own assets is a grave admission of an inexcusable act. No Government property, whether fixed or moveable, can be left unaccounted...’’ And that dereliction had an immediate, and decisive consequence. ‘‘As 52 Report of the Public Accounts Committee on ‘Privatisation of Power’ the books of accounts of the DVB were in a sorry state,’’ the Draft reports, ‘‘it would have been prudent to set the accounts straight, before appointing the consultant. In the absence of audited books of accounts, it was difficult for the Department to determine the requirement and scope of work that was to be entrusted to the consultant. It also left the Department with no other option except to accept the consultant’s recommendations’’.
So, a two-step manoeuvre: first select a convenient consultant, and then plead that you have no option but to go by his advice! When this was put to officials of the Delhi Government, the PAC Draft records, ‘‘the Department brazenly stated, this is not denied; this is what the consultants were engaged for’’. And the Draft points to the tell-tale contrast: ‘‘Surprisingly the Department did not feel it fit to rely on the consultant’s figures on the AT&C Loss reduction percentage and pending dues of the DVB (receivables) and later revised the figures in favour of the DISCOMS’’. And therein, as we shall see in a minute, lies another nugget.
The PAC Draft goes through the steps that the valuation entailed, and shows that the final result depended on a string of ‘‘assumptions and weightages’’. These would naturally depend on the consultant’s assessment of future flows of income, etc. The point was that Government tied its hands — for, as the PAC Draft records, in the absence of records, not only had ‘‘the consultant to resort to approximate figures and generalized assumptions,’’ the Government had ensured that it would have no way to check the projections! Recall that the CAG had asked the Delhi Government for the basis of valuation, and it had told him that it did not know them as they were available only in ‘‘the computer modeling of the consultant’’!
The CAG had felt content with that ‘‘explanation’’. The PAC Draft goes further, and records the result — ‘‘The Department failed to verify the authenticity of the data used for the assumptions and projections’’— and it gives a revealing illustration. The rationale for the entire exercise of privatization was to reduce the transmission and distribution losses that DVB was suffering. The major components of valuation would be two: the level at which the losses were at the time the distribution would be handed over to the private companies, and targets that were set for their reducing these losses over the five years for which the distribution was to be given to them.
It turns out that by the time distribution was handed over, the T&D losses had already been brought down by 2 to 4 per cent. To get a measure of what that means, recall that the total percentage by which the private companies were eventually required to reduce these losses in 2002/03 was half a percentage point! The target which the companies were asked to fulfill had already been accomplished four to eight times over! Nor was that the end of the Delhi Government’s generosity, the PAC Draft records — the capital expenditure incurred after the assets had been ‘‘valued’’ i.e. during the fifteen months preceding the privatization was left out of the calculation, and the benefits accruing from it were made over as a free gift to the private companies.
Criminal, true. But just the beginning!
PART-II
This way to accountability
53 Report of the Public Accounts Committee on ‘Privatisation of Power’ Posted online: Friday, September 30, 2005 at 0000 hours IST
In a word, as convenient a sequence as anyone can contrive! The CAG asked the Congress-I Government of Delhi, ‘‘What is the basis of valuation’’? We don’t know, it said. Only the consultant knows. And what he knows is in his ‘‘sophisticated computer modeling’’ which he ‘‘normally regards as his commercial secret’’. The consultant in turn had to adopt a long string of ‘‘assumptions and weightages’’. For these he needed accounts of DVB as well as valuations of its assets, etc. These were not available. Therefore, he had to proceed on the basis of what the PAC Draft calls ‘‘approximate figures’’. So approximate were the figures that the number he used for a single item — the amount the private companies could collect as past dues from customers — differed from the true figure by Rs. Three thousand one hundred and seven crore! The Accountant General of the state exposed all this. His report was scrubbed clean by the CAG. Hence, while considering the CAG’s report, the PAC Draft nailed all of it all over again, and in addition brought on record the evasions and outright lies of the Delhi Government. The Congress-I blocked its formal adoption. And the Prime Minister keeps giving speeches on probity and accountability!
Having examined the ‘‘assumptions and weightages’’ and the utter lack of bases for them, the PAC Draft was compelled to conclude that ‘‘the basis on which the magic figure of 3,160 crore was arrived at is not clear’’. Indeed, that itself is an understatement of the first water. ‘‘For instance,’’ the Draft continues, ‘‘while eighty-five 33 KV Grids and fifty two 66 KV Grids have been transferred to the [private] DISCOMS, in its reply dated 4th August 2005 the Department states that ‘as no proper Fixed Assets Register was being maintained, the value of individual grid cannot be ascertained’’. And so the PAC Draft had no option but to conclude, ‘‘The Committee recommends an enquiry by the Central Vigilance Commission into the conduct of all those top officials who managed the erstwhile DVB in the last three years prior to privatisation for their acts of criminal breach of trust, dereliction of duty, negligence and lack of supervision on their part. They had failed to ensure proper maintenance of audited books of accounts, asset registers, inventory of stocks, etc. This gross act of negligence has cost the exchequer several thousand crores since, in the absence of all these vital records, the Government was forced to accept the asset valuation done by the sole consultant and property of the erstwhile DVB running into several thousand crores was transferred to the DISCOMs for a pittance’’— no declamations from the Congress-I leadership this time, I notice, that the family silver ‘‘kaudiyon ke daam bechaa jaa rahaa hai’’! ‘‘This action [of instituting a CVC inquiry forthwith] at this stage is of paramount importance so that it acts as a deterrent for the other Heads of other commercial heads of the Government,’’ says the PAC Draft.
Whose conduct does it recommend must be examined? ‘‘The conduct of all those top officials who managed the erstwhile DVB in the last three years prior to privatization’’. And guess whose name leads all the rest in this distinguished category? The very officer who has penned such pretentious ‘‘rebuttals’’ in this paper!
As I mentioned, there were vast discrepancies between the actual figures and those used by the handpicked consultant — for receivables, for instance. Between the figures that the consultant used and what the position had become by the time the distribution was actually transferred to these private companies — for instance, in regard to those T&D losses and capital expenditure. But the mischief did not end there. As the PAC Draft 54 Report of the Public Accounts Committee on ‘Privatisation of Power’ records, when the authorities were cornered, an estimate was indeed prepared of receivables through an ‘‘investigative audit’’. The audit indicated that the private companies could garner Rs. 3,261 crore from this head. Recovering these dues was one of the principal objectives of privatisation. And the Transfer Scheme prescribed that the companies would give 80% of this amount that they collected to Government, keeping 20% for themselves.
The PAC Draft dissects the evasions that the Delhi Government tried to feed it and records that, first off, the private companies just refused to accept the figures! Next, they maintained that they had been able to collect only Rs. 332 crore of the Rs. 3,261 crore. And then they refused to give the 80% share of even this paltry collection to the Government, and instead ‘‘adjusted’’ the amount against what they said the Delhi Government owed them!
Official lies
But for the moment, I am on the officials rather than on the companies. The PAC Draft gives us a glimpse of what falsehoods and evasions they peddle. Asked about the ‘‘discrepancies’’ in the overall figures and about the fact that nothing had been received from the collection of past dues by Government in complete contravention of the Transfer Agreement, ‘‘In the meeting held on 21st February 2005 the Departmental Representatives stated that the holding company was reconciling the figures on quarterly basis,’’ records the PAC Draft — in a word, wait till after you have completed your report. ‘‘The Committee was also informed that the DISCOMs had been directed by the Chief Secretary, Delhi that no adjustments would be made without prior approval’’ — in a word, the problem has already been taken care of. ‘‘The Department was directed to reconcile the amount in three months’’. Meeting over, commitment over! For the next sentence of the Draft records, ‘‘However, in the meeting held on 10th June 2005 in which Chief Secretary [for a second I am omitting what occurs within the parentheses in the text] was also present, the Department was still not aware of the exact amount which was recoverable from the DISCOMs. In the meeting the Committee was informed that an amount of Rs. 329.78 crores had been collected by the DISCOMs but the amount actually remitted to the Government was not known’’.
‘‘The CS [Chief Secretary; I again omit what is within the parentheses] had admitted that due to inefficiency on the part of DVB, huge arrears had accumulated which the Government is now finding difficult to recover’’.
The PAC Draft rightly comes down heavily on this passing of the buck to the DVB — after all, not only did the DVB function more or less as a department of the same Government, as a wholly owned subsidiary, so to say, of the Power Department itself, the officials who were deputed to run it were from the same Government, and would soon return to it! That even that is not the end is evident from what is in the parentheses of the PAC Draft’s text: the Chief Secretary, notes the PAC Draft, ‘‘also holds the additional charge of Principal Secretary (Power)’’! And, if I may add, he is also one of the officials who were involved in the entire privatisation process. But now that questions are being asked, the Government of which the highest official is the Chief Secretary passes the buck to the Department of Power headed by the very same man; and the Department of Power passes the buck to
55 Report of the Public Accounts Committee on ‘Privatisation of Power’ the DVB which is controlled and directed by officials on deputation from the same Government, indeed from the same Department! Talk of closely held private companies!
The ‘independent auditor’
But Government departments are not the only closely held private companies, private companies are too! So, I was not surprised at a delicious tidbit, which I am afraid even the PAC Draft missed. As even the CAG’s sanitised report had done, the PAC Draft comes down heavily on the manner in which stores worth crores were transferred to the two private companies free of cost. It turns out that after the CAG’s report, the Delhi Government, to use its phrase, engaged in ‘‘vigorous follow up’’ of this issue. The TATA distribution company agreed to pay for the stores that had been transferred to it. The Reliance companies refused to pay for what they called ‘‘Capital Stores’’.
An ‘‘independent auditor’’ was appointed by, as the PAC Draft notes, ‘‘mutual consent’’ to evaluate the stores. The auditor did not submit his report in time, records the PAC Draft. And when his report came, it was incomplete. ‘‘In spite of these deficiencies,’’ the PAC Draft states, ‘‘the auditor was promptly paid for his services’’.
The next step was even better. In spite of the fact that this ‘‘independent auditor’’ had been appointed by mutual consent, ‘‘the DISCOMs neither agreed to the valuation of the independent auditor,’’ the PAC Draft notes, ‘‘nor that of TRANSCO’’ — the Government- owned transmission company. Having raised a dispute, the companies naturally were no longer under an obligation to pay, and, in turn, the Government could plead helplessness! Result? The PAC Draft records, ‘‘On the one hand the Government appears to be liberal whilst disbursing payments to the auditors and DISCOMs and when it is the turn of the Government to recover its dues, it has failed to do so. The Government appears to be dancing to the tune of the DISCOMs’’.
As you would have noticed, I have put the adjective ‘‘independent’’ before ‘‘auditor’’ in inverted commas. For that is the delicious morsel. The ‘‘independent auditor’’ who was chosen for this purpose was M/s TR Chadha & Company. I am sure they are a fine outfit — they may have been chosen in disinvestment transactions too, for all I know. But their ‘‘independence’’ in the present instance is especially reassuring. You see, the Balance Sheets of BSES Rajdhani for 2002/03 and 2003/04 that I have before me show that M/s TR Chadha &Co. are the chartered accountants for these Reliance companies! By the sort of coincidence that delights, it so happens that the Balance Sheets of the Reliance companies and the correspondence relating to valuation of the stores is signed by the very same, no doubt independent man, namely, ‘‘For TR Chadha & Co, Chartered Accountants, Sanjay Gupta, Partner’’.
Hence, first stores worth a hundred crore or more are transferred free of cost. When the matter erupts in public, the chartered accountant of the company to which the stores have been transferred free is appointed as the ‘‘independent auditor’’ by ‘‘mutual consent’’. He delays submitting his report. Then he submits an incomplete report. Then the company of which he is the chartered accountant refuses to accept his valuation. The PAC nails all this, in its Draft. The Congress-I prevents the Draft from being adopted. But all is not lost — the Prime Minister and Finance Minister are still giving their speeches extolling accountability. 56 Report of the Public Accounts Committee on ‘Privatisation of Power’ The most blatant violation, and the recommendation for a CBI inquiry
Even the CAG’s sanitised report had noted a string of fatal facts regarding the bids that were accepted: contrary to what the CAG seems to think is right, the bids were from single bidders; the bids were rejected; then private negotiations were conducted with these single bidders; massive concessions were given during these private negotiations; these concessions were kept secret from other bidders who had been in the race originally; the only authority that was competent to authorize the concessions, was bypassed deliberately; the explanation that the Delhi Government trotted out to the CAG — an opinion procured from its own Law Department — did not deal with the question at hand at all.
The PAC Draft recounts these, and nails additional facts that are even more damaging.
Originally 32 companies had entered the fray. Then seven remained. Of these, six were short-listed. In the end only one bidder each submitted bids for the three circles. The document on the basis of which bids had been invited had stated clearly, ‘‘The bids to be given shall be unconditional. The bids, which are conditional, shall be liable to be rejected’’. Furthermore, the document had stated explicitly, ‘‘It is a condition of the bid that the bidders accept the documents (including the tripartite agreements) and agree to be bound by the terms and conditions therein. Government shall have no obligation to the bidders to discuss or negotiate any agreement or terms thereof either before or after the submission of the bids’’.
The PAC Draft shows that both these categorical stipulations were violated by the Delhi Government. The bids that were received were conditional bids. Second, having rejected them, the Government entered into private negotiations with the single bidders — these negotiations, the PAC Draft points out were not held with ‘‘the highest bidders’’ but with ‘‘conditional bidders who had violated the conditions of the RFP [the Request for Proposals document]’’.
It then lists the scandalous manner in which, and the scandalous extent to which targets, etc, were lowered, and how a heap of concessions were conceded. Many of these were in direct violation of the basis on which bids had been invited. For instance, the key target — reduction in Transmission and Distribution Losses — was reduced. But the bid document had stated, ‘‘The AT&C loss reduction stated by the bidder for any DISCOM for any given year should not be less than the minimum levels stipulated by the Government... The bids are liable to be rejected in case the AT&C loss reduction stated by the bidder is less than the minimum levels stipulated by the Government’’.
Once other bidders had withdrawn, this central stipulation was waived, and they were not told! The single bidders were asked to submit revised bids. Even these revised bids were conditional, the PAC Draft shows. The Government bent further, and, to use the expression of the PAC Draft, ‘‘accommodated’’ the convenience of the private companies yet again.
The PAC Draft lists further boons that were conferred, and concludes, ‘‘The Committee is of the opinion that the members of the Core Committee bent all rules and in blatant violation of the RFP clauses... colluded with the business houses... And at their behest 57 Report of the Public Accounts Committee on ‘Privatisation of Power’ made drastic changes in the transfer scheme so as to accrue monetary benefits to the conditional bidders in the long run. The members of the Core Committee also attempted to undermine the authority of the competent authority (the Hon’ble LG) by seeking a doctored legal opinion from the Law Department of the Delhi Government so as to alter the definition of ‘Government’.’’
‘‘In this background,’’ the PAC Draft continues, ‘‘the Committee feels that all was not above board and it does not rule out the involvement of one or more members of the Core Committee in favouring the conditional bidders for monetary considerations by accepting conditional bids and effecting major modifications in the Transfer Scheme, policy directions and contract agreements without the approval of the competent authority’’.
Hence, the PAC Draft concludes, ‘‘The Committee recommends that the Government should approach the Central Bureau of Investigation for an enquiry to ascertain the circumstances that led the members of the Core Committee to go against the interest of the public exchequer by favouring the conditional bidders’’.
As the Congress-I has blocked the final, formal step of adopting this report; as little can be expected from high-ups of this Government; as the CAG has chosen to lend its authority for covering up the facts, citizens should:
• Approach the Supreme Court, and request it to direct that CVC and CBI, under its supervision, carry out the inquiries that the PAC Draft has recommended;
• Remembering that the Freedom of Information Act comes into operation in just a fortnight, begin preparing applications to get all the documents that nail what happened.
(Concluded)
THE HINDU – 13TH MARCH 2006
A setback for Sheila Govt.
Sujay Mehdudia
"CM seems to be `protecting' those indicted in the PAC report on smart card scam"
NEW DELHI: By deciding to opt for a whip against acceptance of the Public Accounts Committee report on Rs. 150 crore smart card scam severely indicted officials and a private company, Chief Minister Sheila Dikshit seems to have lost the high moral ground of being above board on the issue of corruption thereby exposing herself to allegations of wrongdoing.
58 Report of the Public Accounts Committee on ‘Privatisation of Power’ Political observers here are of the view that the claims of the Chief Minister of being open and transparent have come undone and she has been seen giving "legislative protection" to those who have been accused of corruption.
The latest PAC report by senior Congress legislator S.C. Vats has dented the image of the Delhi Government and is the second successive blow to Ms. Dikshit during the past one week. The earlier one being the PAC report on privatisation of power distribution network that had also charged the Government with not following proper procedure and had talked about "monetary considerations" by the Core Committee for benefiting big business houses. The Chief Minister is already under a cloud on the controversial 140 MGD Sonia Vihar water treatment plant that has failed to take off.
Both the PAC reports have recommended a CBI probe. Many feel that if the Chief Minister has nothing to hide then she should not shy away from a probe. It is also learnt that Assembly Speaker Chaudhary Prem Singh will now send the report to Lieutenant-Governor B.L. Joshi for further action, something that could upset Delhi Government's calculations. It is also understood that the party high command has also taken note of the developments and is closely monitoring the whole situation, including the efforts to bail out a private company accused of corruption.
"Ms. Dikshit has been in a state of crisis due to the wrong advice by her close aides. Some MLAs who surround her all the time continue to feed her with wrong and misleading information and that has led to the present crisis," a senior dissident Minister remarked.
While Ms. Dikshit needs to be come clean on the issue of corruption, observers feel that whatever be the motive, Dr. Vats needs to be complimented for having done such an in-depth report probing various acts of omission and commission in privatisation of power distribution network, smart card scam and on the functioning of the Sales Tax Department. "Dr. Vats has set a precedent that would be very difficult for others to follow.
The work done by him is by far the best since the creation of the Assembly in 1993. He has been able to restore the authority and dignity of the House Committees that had come to be known as another extension of the Delhi Government. In one stroke he has changed the entire perception and done a fabulous job," a senior Parliamentary official associated with the Assembly remarked.
PAC lashes out at DERC
Staff Reporter – 13th March 2006
It has lost autonomy and credibility, says panel headed by senior Congress MLA S.C. Vats
59 Report of the Public Accounts Committee on ‘Privatisation of Power’ NEW DELHI: The Public Accounts Committee report on privatisation of power tabled in the Delhi Assembly last week has raised serious questions about the actions and role of the Delhi Electricity Regulatory Commission (DERC) stating that it had lost its independence, autonomy and credibility over a period of time.
Questioning the role of the Commission, the PAC headed by Congress MLA, S.C. Vats, states that rather than safeguarding the interest of consumers at large it has acted as a hidden hand of the Government and power distribution companies. Referring to the issue of rebate, the PAC stated that in spite of the fact that the discoms had claimed excess rebate in violation of the Bulk Supply Agreement, no penalty, interest or late payment surcharge was allowed to be collected from them. Instead it ordered that Transco would have to pay penal interest if it does not calculate the rebate due to each discoms and make the payment within a day. Interestingly, this issue was not before DERC at all.
It said the Standing Committee of Parliament on Energy had also passed severe strictures against the working of DERC and discoms. The functioning of DERC should be strengthened and made more transparent so that it is able to function effectively as a watchdog of the interest of the consumers. Excess rebate was being calculated and deducted by the discoms resulting in short payment of bills despite the fact that it was specifically stipulated in clause 5.2(d) that the discoms will pay the full amount to Transco without deduction, set off or withholding on any account whatsoever unless otherwise agreed upon. The discoms will be required to pay a Late Payment Surcharge at a rate equal to 2.5 per cent per month on the amount delayed.
On the Voluntary Retirement Scheme (VRS) offered by the three discoms, the PAC report states that the VRS was neither mentioned in the tri-partite agreement with the employees of the erstwhile Delhi Vidyut Board nor in the agreements with the discoms. These were introduced by the discoms on their own. As per the agreement, the discoms would be allowed to include the expense on this account in their revenue requirement. The justification given was that this would reduce recurring cost and increase efficiency. This means that the expense on account of VRS would be indirectly borne by the consumers in the form of increased tariff. Similarly, in the absence of any barrier on the salary package of the executive or non-executives of the discoms, how could it be assured that recurring cost would reduce in future? There is nothing to stop the discoms from giving its executives more salary and benefits and then claiming it as an expense of its Annual Revenue Requirement. "This is yet another example of the Government acceding to the whims of the discoms at the cost of the consumer," it concludes.
Another crisis in Congress – 21st September 2005
Sujay Mehdudia
PAC chief Vats resigns over `bid to sabotage report' on power privatisation
60 Report of the Public Accounts Committee on ‘Privatisation of Power’
Dr. S.C. Vats
NEW DELHI: The Congress-led Government here in the Capital was in the throes of another crisis on Tuesday with senior party leader and MLA S.C. Vats resigning as Chairman of the Public Accounts Committee in protest against "attempts" to "sabotage" the tabling of the PAC report in the monsoon session of the Delhi Assembly beginning this Thursday. The report is understood to have indicted the Sheila Dikshit Government over the issue of privatisation of power.
"I have submitted my resignation to the Speaker, Chaudhary Prem Singh. What happened at the meeting is confidential but is unfortunate and does not augur well for healthy functioning of democratic institutions," Dr. Vats told The Hindu soon after submitting his resignation.
Refusing to elaborate, Dr. Vats said all that happened during the meeting and the contents of the report were strictly confidential.
It is learnt the report has made a "scathing attack" on the Delhi Government and the methodology adopted in the process of privatisation of the power sector in the Capital. Sources informed that the report had "embarrassing" contents, putting a question mark over the manner in which the Core Committee comprising senior bureaucrats had handled the issue of awarding the contract to the private power companies.
The report is also understood to have indicted the Delhi Government for completely violating the Central Vigilance Commission (CVC) guidelines and norms in appointment of SBI Caps as private consultants for working out the privatisation process.
Further, it has pointed out that there was a deliberate attempt by the Government and certain bureaucrats to make Delhi Vidyut Board sick and turn it into a loss-making organisation. It is learnt PAC has also questioned the reversal of certain decisions by the Cabinet as well as the Core Committee with regard to finalising the private players. The PAC has pointed out that the Core Committee had conveyed to the Cabinet not to accept the report in April 2002 as the offers made by private players were unacceptable. However, suddenly during the one month between April-May 2002, the Core Committee changed its opinion and the Cabinet also reversed its decision and awarded private players a role in distribution of power despite these companies making no new offer, raising a lot of questions that have remained unanswered till date. It has also questioned the role of the Delhi Government in pro-actively working to appoint SBI Caps as a consultant that had little experience in privatisation of power.
Interestingly, the Sheila Dikshit Government had been on tenterhooks ever since Dr. Vats 61 Report of the Public Accounts Committee on ‘Privatisation of Power’ was appointed as the PAC chairman. Sources informed that in the meetings held during the past few months, only a handful of members turned up but on Tuesday all the five Congress MLAs including former Power Minister Narendra Nath turned up. He was the first one to object to the adoption of the report, arguing that the PAC cannot go into the issue of privatisation of power and only talk of post-privatisation, a claim disputed by the BJP MLAs and the chairman. However, with the support of four other MLAs, they managed to sabotage the adoption of the report.
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62 Report of the Public Accounts Committee on ‘Privatisation of Power’ CVC probe recommended into power privatisation – 22nd September 2005
Staff Reporter
Guidelines for appointment of consultant flouted, says the Public Accounts Committee of the Delhi Assembly
PAC report talks of complicity, negligence and deliberate connivance in the controversial power privatisation process Urges Govt. to approach the CVC for a thorough probe into the conduct of all top erstwhile DVB officials
NEW DELHI: Charging that in the matter of appointment of consultants for the process of privatisation of the power sector in Delhi three years ago all the guidelines of the Central Vigilance Commission (CVC) were flouted, the Public Accounts Committee of the Delhi Assembly has recommended that the Government refer this matter to the CVC for a thorough probe to determine the complicity and motive on part of the officials involved in the exercise of appointment of the private consultant -- SBI Caps -- that seems to have been done in "decent haste'' flouting the law.
The PAC report talks of complicity, negligence and deliberate connivance in the controversial power privatisation process in the Capital right from the word go.
Under-valuation of assets
It also speaks of a "big scam'' in under-valuation of the erstwhile Delhi Vidyut Board assets and has urged the Government to approach the CVC for a thorough probe into the conduct of all top officials of the DVB who not only mismanaged this prime service agency but also rendered it into a miserable organisation over a couple of years.
"It was observed during audit that no discernible procedure or method was followed for selection of consultants. There was no effort to invite competitive bids from the open market nor was there any attempt to first assess and define the scope of work to be assigned to the consultants which would have enabled a systematic and transparent comparison of the offers received.''
The PAC has stated that the Delhi Government's Power Department failed to do the necessary groundwork before appointing the consultants. The Department erred on two counts. First, the prescribed procedure for appointment of consultants was not followed and secondly the terms of reference on which the consultant was to submit a report were not finalised.
"The Department should have first decided the terms of reference on which the consultants were to act upon. Open tenders should have been floated and the terms of reference should have been made available to each bidder to ensure a level playing field. Howsoever impressive the performance of SBI Caps may have been, the Government procedure on financial matters does not permit any department to ``pro-actively'' contact a single company for its services, In the absence
63 Report of the Public Accounts Committee on ‘Privatisation of Power’ of uniform terms of reference the bids of the three companies SBI Caps, ICICI and ASCI could not be compared,'' it has concluded.
The report says the Department failed to adhere to the prescribed financial procedures as well as the guidelines of the CVC while appointing SBI Caps as the consultant.
"The matter may be referred to the CVC for a thorough probe."
Assets register incomplete
The Department's admission that the Delhi Vidyut Board's fixed asset register was not complete indicates a very serious lapse on the party of the officers manning erstwhile DVB. It is surprising that the Department has not found it fit to seek the reasons for this lapse.
Instead it chose to gloss over it and opted for the easiest way out. The statement that the Department had no idea of its own assets is a grave admission of its inexcusable act. No government property, whether fixed or movable, can be left unaccounted.
Valuation methodology
The PAC is of the opinion that in the absence of a complete Fixed Asset Register the Department had no option but to opt for the business valuation methodology for the valuation of assets.
"The PAC recommends enquiry by the CVC into the conduct of all top officials who managed DVB in the last three years prior to privatisation for their acts of criminal breach of trust, dereliction of duty, negligence and lack of supervision on their part.''
© Copyright 2000 - 2005 The Hindu
64 Report of the Public Accounts Committee on ‘Privatisation of Power’ Privatisation done in haste, DVB made deliberately sick, says PAC – 22nd September 2005
Staff Reporter
Puts a huge question mark over the whole process of power privatisation and unbundling of the erstwhile DVB
NEW DELHI: Putting a huge question mark over the whole process of power privatisation and unbundling of the erstwhile Delhi Vidyut Board three years ago, the Public Accounts Committee of the Delhi Assembly has concluded that the State Power Department had acted in an inefficient and negligent manner and deliberately reduced the public utility to a miserable organisation. It has recommended an enquiry into the conduct of officials who not only landed the DVB in a financial mess but also caused such colossal loss to the public exchequer.
"Had the Department shown such haste as it had done in case of power privatisation in controlling the rot in DVB, there might not have been a need for privatising at all. With the amount of support and subsidy and at the present rate of tariff hike, sincere efforts could have been made to revive the DVB. The DVB could have made profits over a period of five years given the same amount of assistance which was extended to the private distribution companies,'' the report states.
Further, it adds, in the first place the Power Department should have considered the option of managing the affairs of DVB more efficiently by involving professionals and technocrats and if at all privatisation was to be attempted it should have been done in a phased manner and the distribution and transmission should have been handed over to companies in public sector on the pattern of NDMC. The Power Department not only acted inefficiently but negligently and reduced the public utility agency into a miserable organisation that could not produce its asset register and audited books of accounts for valuation at the time of privatisation. ``This gross act of negligence has cost the exchequer several thousand crores since in the absence of all these vital records the Government was forced to accept the asset valuation done by the sole consultant and property of the erstwhile DVB running into several thousand crores was transferred to the private distribution companies for pittance. This action at this stage is of paramount importance so that it acts as a deterrent for the other heads of other commercial undertakings of the Government''.
Expressing concern over the performance of the discoms, the PAC states that despite three years of privatisation, the consumer has to suffer power cuts, low voltage and exorbitant bills. The tariff hike has become an almost annual affair for the consumer. The Government extended a subsidy for a select category of consumers as a temporary relief only to withdraw it later.
The complaint of erratic meters is widespread with no relief in sight. The Government should constitute a technical committee of experts, preferably from IITs, to look into the issues. Standardised meters manufactured by reputed companies should be made available and the consumer should have the option to select the one that he prefers.
The PAC says the Government should ensure a thorough audit of the billing software system and the entire accounts of the discoms by independent auditors and technocrats.
65 Report of the Public Accounts Committee on ‘Privatisation of Power’ "At present there is no mechanism to ensure that the discoms have made the necessary investments, utilised funds, achieved the loss targets or accounted properly for the government dues in matters of recovery of arrears and stores.''
PAC rejects power privatisation report, its chairman quits
S.C. Vats’ report had called for a Vigilance probe of the exercise.
Sreelatha Menon – Indian Express
New Delhi, September 20: TWO days ahead of the Monsoon Session of the Delhi Assembly, the chairman of its Public Accounts Committee (PAC), Dr S C Vats, resigned after members of the panel rejected his report recommending a Vigilance probe of alleged anomalies in the power privatisation process.
The report prepared by the Congress MLA from Shakurbasti referred to the recommendations of the Comptroller and Auditor General (CAG) regarding alleged irregularities in the 2001 power privatisation process, sources said.
Dr Vats, who sent his resignation to the Secretary to the Assembly, told Newsline today: ‘‘The objective of the PAC is to ensure financial accountability of the executive to the legislature. But that has been defeated with people obstructing the only such forum...I thought it better to quit.’’
Congress members of the nine-member panel reportedly expressed reservations on adopting the report. Sources said the Congress members at first refused to discuss the issue and later voted against adopting the report.
‘‘You can always make amendments instead of outright rejecting the very subject. It is outrageous to prevent discussion,’’ Vats told Newsline today.
Members of the panel include Narendra Nath, Kiran Walia, Vir Singh Dhingan, Ramesh Lamba, Baljor Singh of the Congress and Jai Bhagwan Agarwal, Ramvir Singh Biduri and Sahib Singh Chauhan from the Opposition. The BJP members of the PAC, were reportedly planning to raise this issue in the Monsoon session which starts on Thursday.
The Central Vigilance Commission has sought details of the privatisation process from the government after receiving a memorandum from BJP legislators.
66 Report of the Public Accounts Committee on ‘Privatisation of Power’ Probe officers who oversaw privatisation: Vats report
Shubhajit Roy
New Delhi, September 21: In his draft report rejected by the Public Accounts Committee, Dr S C Vats has called for probes by the CBI and Central Vigilance Commission into the conduct of the core-committee that oversaw the privatisation of the Delhi Vidyut Board.
In the 45-page report, Dr Vats, who resigned as the PAC chairman yesterday, accused three senior officers who were on the core panel on power reforms —— Principal Secretary (Power), Principal Secretary (Finance) and Planning - for ‘‘showing haste’’ in privatising the Delhi Vidyut Board.
The draft report —— a copy of which is with Newsline —— also asked the government to tackle pressing problems such as billing, VRS for employees and an ‘‘ineffective’’ regulator.
On billing, it said that the government should ensure a thorough audit (including physical audit) of the billing software system.
It also called for an audit on the accounts of the discoms by independent auditors and technocrats, preferably from the IITs.
The government is set to face a stormy monsoon session from tomorrow with Congress rebels and BJP legislators planning to take up the issue.
The report also says there were problems with the way SBI Caps was appointed as a consultant for the privatisation process.
It said the terms of reference on which consultants were to act upon should have been decided before bids were invited.
Open tenders should have been floated. In the absence of uniform terms, bids of three companies, SBI Caps, ICICI and ASCI could not be compared, says the report.
The report also questions how the DVB’s assets were valued at Rs 3,160 crore, ahead of privatisation.
67 Report of the Public Accounts Committee on ‘Privatisation of Power’ Delhi govt faces flak over PAC report - NDTV
Rahul Srivastava and Neha Khanna Friday, September 23, 2005 (New Delhi):
There have been demands for a full inquiry into allegations of irregularities in the privatisation of power in Delhi.
At a meeting of the Delhi assembly, most of the opposition legislators wore black to protest the state government's power polices. A report by the Public Accounts Committee, PAC, has demanded a CBI investigation.The probe is likely to set off worries for the government of Chief Minister Sheila Dikshit. The inquiry is to look into conduct of officers who managed Delhi Vidyut Board; For acts of criminal breach of trust; and Negligence costing thousands of crores of rupees during and after privatisation "We directly levelled allegations of corruption against their government and talked of their direct involvement. Yet, they were completely silent on the issue. None of them had the courage to say anything as we had presented extremely hard-hitting facts," said Jagdeesh Mukhi, Leader of Opposition in the Delhi Assembly.
The PAC report has alleged that Delhi government officers pushed DVB towards privatization with ulterior motives.According to the report; prime land worth crores of rupees was rented to power companies at Re 1 a month for 25 years. Distcoms got 137 grids worth Rs 1,200 crore and 10,000 transformers worth Rs 500 crore at very low prices.All this, despite the fact that the Distcoms are majority stakeholders in the power business. The PAC in fact maintains that proper returns from these assets alone could offset the need to increase power tariffs.
DVB officials under scanner It also says that officers of the DVB were more concerned about the interests of the bidders than of the consumers.The report said DVB officers negotiated with bidders instead of accepting or rejecting bids on merit.It said they were involved in undervaluing property and did not recover government dues from Distcoms.
More trouble for Congress
What has put the Congress government in a fix is that the person who headed the PAC is a Congress legislator. The defeat of a no-confidence motion against Sheila Dikshit in the Delhi assembly was a foregone conclusion. But given the numbers, it's certainly not the end of trouble for Dikshit.
68 Report of the Public Accounts Committee on ‘Privatisation of Power’
People's Democracy Vol. XXIX
(Weekly Organ of the Communist Party of No. 40 India (Marxist) October
02, 2005 ANTI-PEOPLE WORLD BANK PRESCRIPTIONS
Delhi State CPI(M) Says No To Privatisation
THE CPI(M) Delhi state committee held a massive protest demonstration near ITO on September 22 against the Sheila Dikshit government’s policy of privatising civic amenities.
The demonstration was addressed by Jogendra Sharma, central committee member, Ashalata, secretary AIDWA Delhi state committee, Albeena Shakil, secretary, Delhi state committee of SFI, Sudhir Kumar, president Delhi CITU, and Party state secretary P M S Grewal.
The speakers accused Sheila Dikshit and her government of acting as agents of private power companies. The resignation of the chairman of the Public Accounts Committee of the Delhi assembly on the grounds that he is being prevented from presenting the PAC report on power privatisation exposes the scam and scandal involved in the process of privatisation of power. This was done because the report severely indicts the government. Shiela Dikshit has repeatedly and most shamelessly defended private power companies owned by Reliance and the Tata group and has been instrumental in providing them hundreds of crores of rupees in subsidies and profits. It is increasingly appearing that she is more a representative of these companies than the people of Delhi. She has lost her moral right to continue as chief minister. The speakers demanded a time bound CBI enquiry into the power privatisation scam.
Speakers also exposed the conspiracy of the Delhi government to privatise water supply as per the World Bank prescriptions. This will lead to manifold increase in water rates and monopolisation of a common natural resource by a few companies and the rich. Speakers gave examples of the disastrous consequences of such measures in other countries. The blueprint of this betrayal is ready and is expected to be signed in November. The speakers declared that the CPI(M) will launch a movement against this grossly anti-people plan and mobilise the people of Delhi to force the Congress state government to withdraw its plan.
Besides the above, the Party took up issues like crimes against women, public distribution system, minimum wages and rights of workers, unemployment, condition of 69 Report of the Public Accounts Committee on ‘Privatisation of Power’ dalits etc in the course of a month long campaign conducted by it in different areas of Delhi.
Demonstrations were also held the same day in Faridabad, Ghaziabad and Noida on similar issues. In Ghaziabad over 1500 people held a demonstration at the DM’s office. It was addressed by Brahmjit Singh and Vijender Sharma, state secretariat members. The demonstration in Faridabad was held at the mini-secretariat and addressed by Mohan Lal and S B Bharadwaj, state secretariat members as well as Faridabad Party district secretary, Vijay Jha. In Noida, the demonstrators were addressed by Baldev Singh, state secretariat member and Noida secretary of the party, Udaichad Jha.
Earlier, CPI(M) state secretary P M S Grewal in a statement issued on September 21 stated that the resignation of Dr S C Vats from the post of chairperson of the Public Accounts Committee of the Delhi state assembly has highlighted the scam and scandal underlying the process of privatisation of power supply in Delhi. Dr Vats had alleged that the presenting of the PAC’s report before the assembly was being sabotaged. This report has severely indicted the Delhi state government for the process adopted while privatising power supply. CPI(M) will not accept this effort of Shiela Dikshit government to conceal the murky process and fall-out of privatisation by sabotaging the PAC report’s presentation, he stated.
The CPI(M) Delhi state committee made the following three demands: 1. All relevant documents concerning the process and terms and conditions of privatisation of power supply must be immediately sealed and handed over to the Central Vigilance Commission. 2. The Central Vigilance Commissioner must conduct an inquiry into the process, particularly the terms and conditions of privatisation of power and submit his/her report within a period of three months. 3. The PAC report must be tabled in the monsoon session of the assembly.
70 Report of the Public Accounts Committee on ‘Privatisation of Power’ BUSINESS STANDARD Fresh trouble for Dikshit govt
Our Political Bureau / New Delhi September 23, 2005
A no-confidence motion against Delhi Chief Minister Sheila Dikshit was moved in the Delhi Assembly today, in part encouraged by MLAs of her own party. The latest crisis in Delhi government has been triggered by an extremely damaging Public Accounts Committee (PAC) report on power privatisation prepared by MLAs belonging mainly to Dikshit's own party. So damaging is the report that PAC chairman SC Vatsa (a veteran Congressman), resigned when several other members of his own party rejected it. Dikshit has been buffeted by one crisis or another especially stemming from the privatisation of the Delhi Vidyut Board (DVB) over three years ago. A civil disobedience movement had been launched by various resident associations complaining of fast running meters installed by private power company BSES, rising tariffs and faulty billing. If that was not enough, a CAG report two years ago raised questions about the manner in which the privatisation deal worked out.
In fact, this is the subject matter of the PAC report as well, which is what sparked off the controversy on the eve of the Monsoon session. While Vats claims that he resigned from his post as PAC chairman due to the refusal of other members of the PAC to endorse the report, his resignation benefits Dikshit, since without a chairman the report cannot be tabled in the Assembly at least during the monsoon session.
According to top sources in the Delhi government, the PAC report raises questions the need for privatisation of the DVB in the first place, claiming that the government made no effort to run the public utility in an efficient manner.
Other than that the PAC report also says that the DVB could not produce its assets register and audited books of accounts, leading to an incorrect valuation of the utility. 'This has resulted in a loss of several thousand crores to the exchequer,' says the report.
The latest fracas over the PAC report and the subsequent no-confidence motion against the Congress government moved by a mere 20 MLAs of the opposition BJP, is just another in a long series of problems for Dikshit.
Her real problems lie in managing disgruntled elements in her own party, who feel deprived of the fruits of power. the last time round she sowed seeds of division among the dissidents by favouring some over others.
She also worked at the growing resentment among dissident leaders like DPCC chief Ram Babu Sharma against the role played by Ajay Maken in such dissident activity since he is being projected as a replacement for Dikshit. How she gets out of the present crisis will be telling.
FINANCIAL EXPRESS PAC for CBI probe into Delhi power reforms
71 Report of the Public Accounts Committee on ‘Privatisation of Power’ Posted online: Friday, September 23, 2005 at 0000 hours IST
NEW DELHI, SEPT 22: Privatisation of power supply in the capital has come under a fresh cloud of controversy with Delhi Assembly’s public accounts committee (PAC) reportedly favouring a CBI probe into the process of power reforms undertaken three years ago.
Creating a flutter right before the Monsoon session of the Delhi Assembly beginning on Friday, PAC chairman SC Vats, a ruling Congress MLA, quit the post, hinting that there was an attempt to sabotage the report.
The PAC report on the privatisation of power in Delhi was to be tabled in the monsoon session, but could not be adopted by the committee at its meeting on Wednesday reportedly due to Opposition from the five Congress members.
The report recommends that the government approach the CBI to carry out an inquiry into the circumstances that led the core committee of officials set up to work out the privatisation of power to “favour” the bidders against the public exchequer.
—PTI
72 Report of the Public Accounts Committee on ‘Privatisation of Power’ PAC chairman’s resignation turned down by Speaker Vats had resigned hinting at an attempt to sabotage the CAG report on power privatisation in the Capital Tribune News Service
New Delhi, September 27
In a new twist to the controversy surrounding the report of the Public Accounts Committee (PAC) of Delhi Assembly on power privatisation in the Capital, Speaker Chaudhary Prem Singh today said he will not accept the resignation of the committee chairman. “I haven’t accepted his resignation. He has made no mistake,” Singh told reporters here. The Speaker, who was responding to a query on whether he had accepted the resignation of PAC chairman and Congress MLA S C Vats, said the committee was a mini-house whose duty it was to study the CAG Report on power privatisation in Delhi. Vats, meanwhile, said he will go by the Speaker’s ruling. “I will do as the Speaker asks,” he told reporters PTI when asked if he still stood by his decision to quit the post. “It is the job of the committee to study the CAG Report, hold discussions on it and prepare its own report on the issue,” Singh said. Vats had resigned from the PAC chairman’s post on the eve of the Monsoon Session, hinting that there was an attempt to sabotage the report. The Report of the Public Accounts Committee on the Privatisation of Power in Delhi, which reportedly indicts the Sheila Dikshit government on the issue and has called for a CBI inquiry into the reforms process, was to be tabled in the three-day Monsoon Session which ended yesterday. Singh said he will ask Vats to take back his resignation, adding he will call a meeting of the nine-member committee over the report. “I will tell them that it is their responsibility to prepare the report, which they should fulfil. There should be no politics over the report,” Singh said. When asked whether Vats had not lost the confidence of the PAC members as revealed by the opposition by majority of them to the report on power privatisation, Singh said, “I have chosen him for the post, not the members”. Parrying a question on whether the contents of the report getting “leaked” to the media was not a breach of privilege of the House, the Speaker said, “If you have any complaints to make, give them in written to me and action will be taken”. Meanwhile, giving an overview of the business transacted during the Monsoon Session, Singh said while the House was supposed to run for ten hours and 30 minutes, it transacted business for 18 hours and 30 minutes.
73 Report of the Public Accounts Committee on ‘Privatisation of Power’
Shaky days ahead for Congress HIMANSHI DHAWAN
TIMES NEWS NETWORK[ WEDNESDAY, SEPTEMBER 21, 2005
NEW DELHI: It may be difficult for the Congress leadership to decide whether the enemy within or the one without is to be feared more.
The party, already riven over the power billing and metering issues, looks even more fragile and vulnerable in the wake of the Public Accounts Committee report.
The stratagem adopted by government managers — to go in for an incredibly short three-day Assembly session — seems to be based on the clear appreciation that there will be fire from all quarters on issues such as water, power, dengue, roads and, of course, the PAC report.
While earlier, the government has been able to simply persuade the Speaker to eject the Opposition for days on end from the House and so avoid inconvenient questioning, this time the rift in its own ranks is quite wide. Even if the Opposition were evicted, many Congress MLAs would be more than prepared to make up for the BJP's absence.
The explosive contents of the report that has validated the recommendations of the Comptroller and Auditor General (CAG)'s findings were made public on Wednesday after the PAC refused to adopt its own report. The timing of the entire episode is quite unfortunate for government.
With the Delhi assembly monsoon session starting on Thursday, both the BJP and the Congress dissidents have been given enough fodder to raise a ruckus in the House. BJP legislators already demanded a CVC probe while for the dissidents this is a shot in the arm, as could be made out by the high spirits in evidence at the DPCC which a dissident holdout. The government however seems to be lurching from one crisis to the other. The administration and political leadership had barely expressed a sigh of relief after being pushed to the wall over the power tariff hike issue two weeks ago. Things were looking calmer. The CM had "taken note" of public sentiment, rolled back tariff and both the power minister and she were seen making no excuses for the discoms. However the uneasy peace brokered by deals made to weaken the dissident camp has not lasted long. Sources say that CM loyalists were briefed to "manage" the PAC. However the move backfired. At first members demanded a Hindi copy of the report and then simply refused to accept it saying that it was not the "mandate of the PAC". An incensed Vats then resigned from his position as chairman late on Tuesday night.
74 Report of the Public Accounts Committee on ‘Privatisation of Power’ PAC favours CBI probe into process of power reforms in Delhi - OUTLOOK NEW DELHI, SEP 21 (PTI)
Privatisation of power supply in the capital has come under a fresh cloud of controversy with Delhi Assembly's Public Accounts Committee (PAC) reportedly favouring a CBI probe into the process of power reforms undertaken three years ago.
Creating a flutter right before the Monsoon Session of the Delhi assembly beginning tomorrow, PAC Chairman S C Vats, a ruling Congress MLA, quit the post, hinting that there was an attempt to sabotage the report.
The Report of the Public Accounts Committee on the Privatisation of Power in Delhi was to be tabled in the Monsoon Session that starts tomorrow, but could not be adopted by the committee at its meeting yesterday reportedly due to opposition from the five Congress members.
Sources said the committee, in the report, prepared over the last four months, recommends that the government approach the CBI to carry out an inquiry into the circumstances that led the core committee of officials set up to work out the privatisation of power to "favour" the bidders as against the public exchequer.
75 Report of the Public Accounts Committee on ‘Privatisation of Power’ BJP workers to gherao Delhi Assembly today Tribune News Service
New Delhi, September 21 2005 Workers of the BJP Delhi Pradesh shall gherao the Delhi Legislative Assembly tomorrow, demanding the resignation of the Chief Minister on the issues relating to fast-running electronic meters, increasing prices and anti-people policies of the government.
The BJP Pradesh president has also called on the Congress legislators opposing the high- handedness of the private power companies to take part in the demonstration of the BJP so that people get to know that the Congress legislators were not shedding crocodile tears. The BJP demonstrators shall assemble at Master Chandgi Ram Akhara tomorrow and proceed towards the Delhi Legislative Assembly. They shall gherao the Chief Minister and compel her to sign a resignation letter. On the eve of the demonstration, Dr Harsh Vardhan has announced that if the people of Delhi give an opportunity to the BJP to serve them then it will order a high-level inquiry into the bunglings in the privatisation of power and connivance between the power companies and the Congress government. The guilty persons shall be sternly punished.
The BJP demanded that the report of the PAC chaired by senior Congress legislator Dr S. C. Vats should be laid on the table of the House and an inquiry should be made against the guilty persons according to the report. He has alleged Chief Minister Sheila Dikshit’s supporting legislators, Ramesh Lamba, Kiran Walia, Baljor Singh, Veer Singh Dhigan and Dr Narendra Nath, deliberately did not accept the report of the PAC because Chief Minister Sheila Dikshit could have been entrapped in it.
76 Report of the Public Accounts Committee on ‘Privatisation of Power’ Another crisis in Congress – 21st September 2005 Sujay Mehdudia PAC chief Vats resigns over `bid to sabotage report' on power privatisation NEW DELHI: The Congress-led Government here in the Capital was in the throes of another crisis on Tuesday with senior party leader and MLA S.C. Vats resigning as Chairman of the Public Accounts Committee in protest against "attempts" to "sabotage" the tabling of the PAC report in the monsoon session of the Delhi Assembly beginning this Thursday. The report is understood to have indicted the Sheila Dikshit Government over the issue of privatisation of power. "I have submitted my resignation to the Speaker, Chaudhary Prem Singh. What happened at the meeting is confidential but is unfortunate and does not augur well for healthy functioning of democratic institutions," Dr. Vats told The Hindu soon after submitting his resignation. Refusing to elaborate, Dr. Vats said all that happened during the meeting and the contents of the report were strictly confidential. It is learnt the report has made a "scathing attack" on the Delhi Government and the methodology adopted in the process of privatisation of the power sector in the Capital. Sources informed that the report had "embarrassing" contents, putting a question mark over the manner in which the Core Committee comprising senior bureaucrats had handled the issue of awarding the contract to the private power companies. The report is also understood to have indicted the Delhi Government for completely violating the Central Vigilance Commission (CVC) guidelines and norms in appointment of SBI Caps as private consultants for working out the privatisation process. Further, it has pointed out that there was a deliberate attempt by the Government and certain bureaucrats to make Delhi Vidyut Board sick and turn it into a loss-making organisation. It is learnt PAC has also questioned the reversal of certain decisions by the Cabinet as well as the Core Committee with regard to finalising the private players. The PAC has pointed out that the Core Committee had conveyed to the Cabinet not to accept the report in April 2002 as the offers made by private players were unacceptable. However, suddenly during the one month between April- May 2002, the Core Committee changed its opinion and the Cabinet also reversed its decision and awarded private players a role in distribution of power despite these companies making no new offer, raising a lot of questions that have remained unanswered till date. It has also questioned the role of the Delhi Government in pro-actively working to appoint SBI Caps as a consultant that had little experience in privatisation of power. Interestingly, the Sheila Dikshit Government had been on tenterhooks ever since Dr. Vats was appointed as the PAC chairman. Sources informed that in the meetings held during the past few months, only a handful of members turned up but on Tuesday all the five Congress MLAs including former Power Minister Narendra Nath turned up. He was the first one to object to the adoption of the report, arguing that the PAC cannot go into the issue of privatisation of power and only talk of post-privatisation, a claim disputed by the BJP MLAs and the chairman. However, with the support of four other MLAs, they managed to sabotage the adoption of the report.
77 Report of the Public Accounts Committee on ‘Privatisation of Power’ CVC probe recommended into power privatisation – 22nd September 2005 Staff Reporter Guidelines for appointment of consultant flouted, says the Public Accounts Committee of the Delhi Assembly
PAC report talks of complicity, negligence and deliberate connivance in the controversial power privatisation process Urges Govt. to approach the CVC for a thorough probe into the conduct of all top erstwhile DVB officials
NEW DELHI: Charging that in the matter of appointment of consultants for the process of privatisation of the power sector in Delhi three years ago all the guidelines of the Central Vigilance Commission (CVC) were flouted, the Public Accounts Committee of the Delhi Assembly has recommended that the Government refer this matter to the CVC for a thorough probe to determine the complicity and motive on part of the officials involved in the exercise of appointment of the private consultant -- SBI Caps -- that seems to have been done in "decent haste'' flouting the law. The PAC report talks of complicity, negligence and deliberate connivance in the controversial power privatisation process in the Capital right from the word go. Under-valuation of assets It also speaks of a "big scam'' in under-valuation of the erstwhile Delhi Vidyut Board assets and has urged the Government to approach the CVC for a thorough probe into the conduct of all top officials of the DVB who not only mismanaged this prime service agency but also rendered it into a miserable organisation over a couple of years. "It was observed during audit that no discernible procedure or method was followed for selection of consultants. There was no effort to invite competitive bids from the open market nor was there any attempt to first assess and define the scope of work to be assigned to the consultants which would have enabled a systematic and transparent comparison of the offers received.'' The PAC has stated that the Delhi Government's Power Department failed to do the necessary groundwork before appointing the consultants. The Department erred on two counts. First, the prescribed procedure for appointment of consultants was not followed and secondly the terms of reference on which the consultant was to submit a report were not finalised. "The Department should have first decided the terms of reference on which the consultants were to act upon. Open tenders should have been floated and the terms of reference should have been made available to each bidder to ensure a level playing field. Howsoever impressive the performance of SBI Caps may have been, the Government procedure on financial matters does not permit any department to ``pro-actively'' contact a single company for its services, In the absence of uniform terms of reference the bids of the three companies SBI Caps, ICICI and ASCI could not be compared,'' it has concluded. The report says the Department failed to adhere to the prescribed financial procedures as well as the guidelines of the CVC while appointing SBI Caps as the consultant. "The matter may be referred to the CVC for a thorough probe." Assets register incomplete The Department's admission that the Delhi Vidyut Board's fixed asset register was not complete indicates a very serious lapse on the party of the officers manning erstwhile DVB. It is surprising that the Department has not found it fit to seek the reasons for this lapse.
78 Report of the Public Accounts Committee on ‘Privatisation of Power’ Instead it chose to gloss over it and opted for the easiest way out. The statement that the Department had no idea of its own assets is a grave admission of its inexcusable act. No government property, whether fixed or movable, can be left unaccounted. Valuation methodology The PAC is of the opinion that in the absence of a complete Fixed Asset Register the Department had no option but to opt for the business valuation methodology for the valuation of assets. "The PAC recommends enquiry by the CVC into the conduct of all top officials who managed DVB in the last three years prior to privatisation for their acts of criminal breach of trust, dereliction of duty, negligence and lack of supervision on their part.''
79 Report of the Public Accounts Committee on ‘Privatisation of Power’ Privatisation done in haste, DVB made deliberately sick, says PAC – 22nd September 2005 Staff Reporter Puts a huge question mark over the whole process of power privatisation and unbundling of the erstwhile DVB NEW DELHI: Putting a huge question mark over the whole process of power privatisation and unbundling of the erstwhile Delhi Vidyut Board three years ago, the Public Accounts Committee of the Delhi Assembly has concluded that the State Power Department had acted in an inefficient and negligent manner and deliberately reduced the public utility to a miserable organisation. It has recommended an enquiry into the conduct of officials who not only landed the DVB in a financial mess but also caused such colossal loss to the public exchequer. "Had the Department shown such haste as it had done in case of power privatisation in controlling the rot in DVB, there might not have been a need for privatising at all. With the amount of support and subsidy and at the present rate of tariff hike, sincere efforts could have been made to revive the DVB. The DVB could have made profits over a period of five years given the same amount of assistance which was extended to the private distribution companies,'' the report states. Further, it adds, in the first place the Power Department should have considered the option of managing the affairs of DVB more efficiently by involving professionals and technocrats and if at all privatisation was to be attempted it should have been done in a phased manner and the distribution and transmission should have been handed over to companies in public sector on the pattern of NDMC. The Power Department not only acted inefficiently but negligently and reduced the public utility agency into a miserable organisation that could not produce its asset register and audited books of accounts for valuation at the time of privatisation. ``This gross act of negligence has cost the exchequer several thousand crores since in the absence of all these vital records the Government was forced to accept the asset valuation done by the sole consultant and property of the erstwhile DVB running into several thousand crores was transferred to the private distribution companies for pittance. This action at this stage is of paramount importance so that it acts as a deterrent for the other heads of other commercial undertakings of the Government''. Expressing concern over the performance of the discoms, the PAC states that despite three years of privatisation, the consumer has to suffer power cuts, low voltage and exorbitant bills. The tariff hike has become an almost annual affair for the consumer. The Government extended a subsidy for a select category of consumers as a temporary relief only to withdraw it later. The complaint of erratic meters is widespread with no relief in sight. The Government should constitute a technical committee of experts, preferably from IITs, to look into the issues. Standardised meters manufactured by reputed companies should be made available and the consumer should have the option to select the one that he prefers. The PAC says the Government should ensure a thorough audit of the billing software system and the entire accounts of the discoms by independent auditors and technocrats. "At present there is no mechanism to ensure that the discoms have made the necessary investments, utilised funds, achieved the loss targets or accounted properly for the government dues in matters of recovery of arrears and stores.''
80 Report of the Public Accounts Committee on ‘Privatisation of Power’
Hindu
High command seeks `status report' on Delhi muddle – 25 September
Sujay Mehdudia
PANGS OF POWER: NEW DELHI: Taking a serious view of the explosive findings of the Public Accounts Committee (PAC) of the Delhi Assembly that money had reportedly influenced the process of privatisation of power distribution in the Capital and monetary benefits were extended to business houses and officials involved in the process, the Congress high command is understood to have sought a complete "status report'' on the alleged multi-crore scam. According to highly placed sources, the idea is to find out to what extent the political leadership was involved in it.
The party leadership summoned Delhi Pradesh Congress Committee president Ram Babu Sharma over the weekend to seek a report on the issue. Mr. Sharma is understood to have met several senior party leaders over the past two days to brief them on the PAC report that has still not been tabled in the Delhi Assembly and about the loyalist MLAs who being part of the Committee sabotaged its adoption.
Among the senior leaders Mr. Sharma is understood to have met are the party general secretary in charge of Delhi affairs, Ashok Gehlot, who is monitoring all the developments in recent days.
It is also understood that some other senior party leaders have brought to the notice of the high command that what they had been alleging all these years about the existence of a multi-crore scam in power privatisation had been borne out now by the PAC report.
"It is a very serious matter. As far as it was limited to only fast-running electricity metres and inflated bills or other problems relating to power and water, it was something that was the prerogative of the Government. But the revelation of the PAC report that money power played a major role in the award of contracts and even officials were involved in this is something very damaging and cannot be overlooked. A report will be submitted to Congress president Sonia Gandhi on this issue as it concerns the Government, the party and its image among the people,'' disclosed a senior ruling party leader on Saturday.
The PAC headed by senior Congress MLA S. C. Vats had made a scathing attack on the whole process of power privatisation saying that rules and norms were bent in blatant violation of all guidelines to ensure monetary benefits for business houses. It had also stated that officials involved in the process of privatisation had also succumbed to ``monetary considerations'' and thereby modified the rules in favour of the private companies.
Sources said the high command had also taken note of the strong resentment prevailing among the Capital's citizens and the elected representatives over the power and water crises afflicting the Capital and the stand taken by a large number of MLAs against their own Government in the Delhi Assembly. The issue of not holding the customary Congress Legislature Party meeting on the eve of the Assembly session has also been taken note of. The fact that a whip was issued to the
81 Report of the Public Accounts Committee on ‘Privatisation of Power’ Congress MLAs only inside the House when debate was under way on the no-confidence motion has also been brought to the notice of the party leadership.
"The Chief Minister has become arrogant and indifferent to the legislators, party and its functionaries. Bureaucrats close to her have misled her into this situation and she refuses to acknowledge it or clear the mess. No individual is above the party or its leadership and this is something that she virtually refuses to accept as her actions indicate,'' said another senior party leader.
© Copyright 2000 - 2005 The Hindu
82 Report of the Public Accounts Committee on ‘Privatisation of Power’ Table PAC report: BJP – 22 SEP 2005
Staff Reporter
"It is clear that there is something fishy'', says Delhi unit chief
The Delhi BJP Chief, Harsh Vardhan
NEW DELHI: Delhi Bharatiya Janata Party president Harsh Vardhan on Wednesday demanded that the report of the Public Accounts Committee chaired by senior Congress legislator S.C. Vats be laid on the table of the Delhi Assembly and an enquiry be initiated against those held guilty according to the report.
Stating that legislators like Ramesh Lamba, Kiran Walia, Baljor Singh, Veer Singh Dhingan and Narendra Nath, who are all loyalists of Chief Minister Sheila Dikshit, had deliberately not accepted the report of the PAC because it was feared that the Chief Minister could have been entrapped by it, Dr. Vardhan said "it is clear that there is something fishy''.
Pointing out that Dr. Vats in his report had recommended an enquiry by the Central Vigilance Commission into the bungling in the privatisation of power, the Delhi BJP president demanded that a probe be constituted into the circumstances in which the power sector was privatised in Delhi with the connivance of the Delhi Vidyut Board officers.
Charging that there was a huge bungling of Rs 8,500 crores in this case, Dr. Vardhan said "this has been confirmed by the Comptroller and Auditor General of India''.
BJP movement
He also mentioned that the BJP had launched a movement against the privatisation of power, alleged loot of private companies and connivance between the Delhi Government and these companies.
The BJP leader said several party legislators like Sahab Singh Chauhan, Ramesh Bidhuri and Jai Bhagwan Aggarwal had also demanded stern action on the basis of this report but the demand had been turned down.
As such, he declared that workers of BJP Delhi Pradesh would now gherao the Delhi Legislative Assembly on Thursday demanding resignation of the Chief Minister on the issues relating to fast running electronic meters, increasing prices and anti-people policies of the Government.
Rare gesture 83 Report of the Public Accounts Committee on ‘Privatisation of Power’ In a rare gesture, the BJP leader invited the Congress legislators opposing the high-handedness of the private power companies to participate in the demonstration so that the people know if they are serious about the issue or were just shedding crocodile tears.
The protestors, he said, would assemble at Master Chandgi Ram Akhara and proceed towards the Delhi Assembly premises to press their demands.
84 Report of the Public Accounts Committee on ‘Privatisation of Power’ Delhi Government Broke Rules for Privatization
Sujay Mehdudia The Hindu September 22, 2005 NEW DELHI: In a severe indictment of the Delhi Government led by Chief Minister Sheila Dikshit over the whole process of privatisation of the power distribution network in the Capital, the Public Accounts Committee of the Delhi Legislative Assembly has accused the powers that be of bending all rules and colluding with business houses to "accrue monetary benefits'' to them. It has alleged possible involvement of one or more members of the Core Committee set up by the Delhi Government for power privatisation in favouring the conditional bidders for "monetary consideration'' by effecting major modifications in the transfer scheme. The report carries a highly damaging indictment of the Delhi Government, its Power Department, and senior bureaucrats who handled the whole process of privatisation three years ago. Sheila Dikshit loyalists did not allow the report to be adopted at the PAC meeting on Tuesday. The PAC, headed by ruling Congress Party MLA S. C. Vats, has recommended that the Government now approach the Central Bureau of Investigation (CBI) for an enquiry to ascertain the circumstances that led the members of the Core Committee to go against the interest of the public exchequer in favouring the conditional bidders. . "The PAC is of the opinion that members of the Core Committee bent all rules and, in blatant violation of the Request for Proposal (RFP) clauses 19.5 and 19.8, colluded with the business houses who were bidding for the power distribution business, and at their behest made drastic changes in the transfer scheme so as to accrue monetary benefits to the conditional bidders in the long run. The members of the Core Committee also attempted to undermine the authority of the competent authority (Lieutenant-Governor of Delhi) by seeking a doctored legal opinion from the Law Department of the Delhi Government so as to alter the definition of `Government','' the report says. The report notes that the same Core Committee prior to fixing this deal had opined to the Cabinet that bids being conditional in nature "may not be accepted in their present form". And by saying that bids may not be accepted in their present form, the members of the Committee wanted to retain the handle with themselves and leave enough scope for them to "manipulate'' things, it adds. In its most damaging portion, the PAC states: "In this background, it is felt that all was not above board and it does not rule out the involvement of one or more members of the Core Committee in favouring the conditional bidders for monetary considerations by accepting conditional bids and effecting major modifications in the transfer scheme, policy directions and contract agreements without the approval of the competent authority.'' According to the PAC report, the Core Committee agreed to all major concessions sought by the bidders and instead of addressing the concerns of the Government and the Capital's power consumers, it seemed more concerned about the bidders' interests. "`The PAC is of the firm view that had the revised conditions and liberal concessions been made public at the time of issue of bids, more bidders would have entered the fray and enabled the Government to strike a better deal in favour of the consumers.''
85 Report of the Public Accounts Committee on ‘Privatisation of Power’ Pro-Sheila panelists press for action against Vats – Pioneer
Staff Reporter / New Delhi
Five members of Delhi Vidhan Sabha's Public Accounts Committee (PAC) have taken an exception to the reported statement of chairman SC Vats that "these committee members were more interested in discussing the draft of PAC in the manner in which the distribution of power was privatised in the Capital."
The five PAC members, considered to be Chief Minister Sheila Dikshit loyalists, are former power minister Narender Nath, Baljore Singh, Kiran Walia, Vir Singh Dhingan and Ramesh Lamba. All of them have refused to accept the draft of the PAC report prepared by Dr Vats. They have also given a notice to the Assembly Speaker, Choudhury Prem Singh, to initiate proceedings and breach of privilege against Dr Vats for allegedly making remarks against the voting.
The members' notice states: "It is breach of privilege and contempt of the House if someone reflects on the character and proceedings of the Committee. Dr SC Vats as chairman of the PAC committee has reflected poorly on the conduct of the committee members forgetting his duties as chairman not to reflect on the speeches and conduct of the committee members."
"Various statements appearing in various newspapers are sufficient proofs of irresponsible behaviour of Dr Vats commenting wrongly on the conduct of the committee members. Dr Vats has commented on the voting rights of the members in the committee's meeting. It is requested that on the basis of sufficient proof of breach of privilege against Dr Vats, the matter may be referred to the Privilege Committee for examining the various issues in detail. You are also requested to exercise your powers as protector of the rights of the members and may debar Dr Vats from the membership," the notice states.
However, the Speaker is yet to decide whether the matter would be referred to the Privilege Committee of the House. Meanwhile, the Speaker has sought a comment from Dr Vats.
When contacted, Dr Vats declined to comment on the issue.
It may be stated that the PAC, probing irregularities pointed out by the Comptroller and Auditor General (CAG) regarding the privatisation of distribution of electricity in the Capital. The PAC had also questioned the manner in which the power sector was privatised in Delhi.
Dr Vats had resigned as PAC chairman as the members did not accept the Committee's report. And, Congress MLAs are divided on the issue.
86 Report of the Public Accounts Committee on ‘Privatisation of Power’
Five PAC members move privilege notice against Vats Express News Service
New Delhi, October 6 2005: IN A new twist to the controversy over the Public Accounts Committee’s (PAC) draft report slamming power privatisation, five out of nine members of the committee have moved a breach of privilege notice against chairman Dr S. C. Vats for allegedly leaking the report.
Demanding his removal, the members—former power minister Narender Nath, Delhi Commission for Women (DCW) chairperson Kiran Walia, Baljor Singh, Veer Singh Dhingan and Ramesh Lamba, have sent the notice to Deputy Speaker Shoaib Iqbal, who is the chairman of the privilege committee,. The notice also says that Vats has reflected poorly on conduct of committee members. ‘‘Vats has made unwanted remarks against the decisions of the committee, tantamounting to contempt of the committee and its members,’’ it reportedly said.
Vats recommends termination of PAC members- Pioneer
Rajesh Kumar / New Delhi
The tiff in the Public Accounts Committee (PAC) of Delhi Vidhan Sabha is not over. Senior dissident Congress MLA and PAC chairman Dr SC Vats has recommended termination of its two members - Congress MLA Prof Kiran Walia and BJP MLA Ramesh Bidhuri - from the committee. They were absent from three consecutive committee meetings on October 7, 10, and 14 without any information. Ms Walia, who is in Chief Minister Sheila Dikshit's camp, had opposed adoption of report prepared by Dr Vats castigating the process of privatisation of the power companies.
Sources in the Delhi Assembly confirmed that Dr Vats has recommended termination of the two members alleging that they were not serious about the functioning of the committee and they had failed to attend committee sittings. "As per rule 164, if a member is absent from three consecutive sittings of a committee without permission of the chairman, the membership of such member may, after giving him an opportunity to explain, be terminated with the approval of the Speaker and thereupon his office in the committee may be declared vacant with effect from the date of such approval by the Speaker," sources said.
The PAC is finding its functioning blocked by its own members. The five pro-Chief Minister camp MLAs have not been attending internal meetings ever since the committee chairman tabled the report on power privatisation for adoption. The report had sought CBI probe into the whole process of privatisation conducted by the Delhi Government. But, it was not accepted as pro-Chief Minister MLAs refused to accept it.
According to sources, two members who had not attended the meetings on the above-mentioned date signed the attendance rolls on October 14 after the committee chairman adjourned the meeting. "After the members had left the committee room, Dr Nath 87 Report of the Public Accounts Committee on ‘Privatisation of Power’ again entered the committee room and asked for the attendance sheet saying that Prof Walia had come and in the meantime, Prof Walia had also entered the committee and allowed to sign the attendance sheet and Dr Vats has taken a serious note of why she was allowed to sign the attendance sheet when she did not attend the meeting," the sources said.
The records state that six members - former Power Minister Dr Narendra Nath, Vir Singh Dhingan, Prof Kiran Walia, Baljore Singh, Ramesh Lamba (Congress MLAs) and Ramesh Bidhuri ( BJP) were not attending the briefing meetings.
The note written by Dr Vats stated: "They neither attended the briefing meeting, nor the meeting held in the committee room despite prior information. Keeping in view that only five more months are left, so kindly nominate members who can contribute to the committee working so that therefore more department can be examined. When contacted, Dr Vats denied that he has recommended for termination of its two members.
But he maintained that PAC is one of the most important committee of the legislature which functions as a watchdog over the executive functioning. "It is unfortunate but this is the only forum where every matter involving the tax-payers money is accounted for. Yet some members have been staying away from meetings. When the committee is proving itself to be effective, the bureaucrats and MLAs are trying to subvert it," he said.
88 Report of the Public Accounts Committee on ‘Privatisation of Power’ PAC meetings: Cong members give it a miss
Sreelatha Menon New Delhi, October 18: THE Public Accounts Committee (PAC) of the Delhi Assembly is finding its functioning blocked by its own members, post the controversial report raising questions about power privatisation. The Congress members of the committee, which investigates into the findings of the Comptroller and Auditor General of India, have not been attending internal meetings ever since chairman S.C. Vats took out a report on power privatisation. The report had sought a CBI inquiry into the whole process of privatisation conducted by the Delhi government. But it was not passed as Congress members voted against it. The first meeting, after the controversial report, that took place in September was boycotted by the five Congress members — Kiran Walia, Narendra Nath, Baljore Singh, Ramesh Lamba and Vir Singh Dhigan. BJP members namely Ramesh Biduri, Sahib Singh Chauhan and Jai Bhagwan Agarwal were said to be present in the meeting. According to sources, Biduri too was missing in the last three meetings. The Congress members once again kept away at the second meeting that was held on October 10. In the meeting on October 14, four of the Congress members attended, while Kiran Walia stayed away. Vats said: ‘‘It is unfortunate but this is the only forum where every matter involving the tax- payer’s money is accounted for. Yet some members have been staying away from meetings.” Vats accused bureaucrats of trying to neutralise the PAC. ‘‘When the committee is proving itself to be effective, the bureaucrats and MLAs are trying to subvert the agency,’’ he said. Narendra Nath, a member, refused to comment on the absentees. ‘‘I cannot say whether it was a boycott or not,’’ said Nath. As per sources, the PAC members are not too happy with the chairmanship of Vats whose term ends in March next year. As per Rule 164 of the Rules of Procedure and Conduct of Business, if a member is absent for three consecutive meetings without intimating the chairman or without taking permission, he can be removed from the committee. The meetings had taken up issues concerning departments of education, health and irrigation and flood including paragraphs of audit in the CAG report on these departments. The chairman has even reprimanded these departments for sitting on the report and not submitting their action to the PAC and the finance department. The committee has told the government departments that they have to submit their action in reports within three months of the CAG report which is usually there by April.
89 Report of the Public Accounts Committee on ‘Privatisation of Power’
THE HINDU
Date:04/03/2006 New Delhi
PAC report rocks Assembly
Staff Reporter
BJP members stall proceedings demanding Sheila's resignation
`PAC report had exposed corruption in power privatisation deal running into hundreds of crores and involvement of bribe-taking to benefit business houses' All BJP members were expelled from the House
NEW DELHI: The Delhi Assembly was thrown into a turmoil on Friday as the Opposition BJP stalled the proceedings forcing adjournment of the House, demanding resignation of Chief Minister Sheila Dikshit for the "strong indictment" by the Public Accounts Committee (PAC) report that probed the controversial privatisation of power distribution in the Capital three years ago. Later in the day all BJP members were expelled from the House for trying to disrupt the proceedings.
The ruckus began as soon as the House unanimously passed a resolution for adoption of the PAC report that has recommended a CBI probe into the dubious role of senior bureaucrats as well as finalisation of the entire privatisation deal. Opposition leader Jagdish Mukhi said a serious situation had arisen after the acceptance of the report by the House and the Government was in crisis.
Stating that the report had exposed corruption in the privatisation of power deal running into hundreds of crores and involvement of bribe-taking and money changing hands to benefit business houses, Mr. Mukhi said in view of these developments the Chief Minister should immediately resign. His colleagues Harsh Vardhan, Harsharan Singh Balli and Sahib Singh Chauhan joined him. All of them said there was no alternative for the Chief Minister but to resign.
The Speaker, Chaudhary Prem Singh, tried to persuade the BJP members to allow the proceedings to go on smoothly but they refused to listen forcing the Speaker to adjourn the House.
Immediately after the House resumed its proceedings, the BJP members were again on their feet asserting that the PAC report by senior Congress MLA S.C. Vats had exposed the serious corruption in the privatisation deal and the Chief Minister had no right to continue in her position. As the din continued, some party MLAs led by Karan Singh Tanwar, Ravinder Bansal, Puran Chand Yogi, Sushil Chaudhary, S.P. Ratawal and Jai Bhagwan rushed to the well of the House chanting slogans demanding the resignation of the Chief Minister. As the pleas to ensure order in the House failed, the Speaker named the MLAs who were physically lifted by the marshals from the House. Later, other party MLAs including Mr. Mukhi and Dr. Vardhan were also expelled from the House for causing disruption.
90 Report of the Public Accounts Committee on ‘Privatisation of Power’ Later speaking to newsmen, both Mr. Mukhi and Dr. Vardhan said that their campaign for resignation of the Chief Minister would continue inside and outside the House. "What we had been alleging for the past three years has been confirmed by the PAC. It is a vindication of our stand that corruption played a big role in privatisation of power," Mr. Mukhi said. Dr. Vardhan said that a meeting of senior party leaders and workers had been convened for Saturday to discuss the situation arising out of the PAC report and warned that the BJP would take to the streets to demand removal of Ms. Dikshit.
91 Report of the Public Accounts Committee on ‘Privatisation of Power’ Smart card scandal takes a new turn
Sujay Mehdudia
PAC members allege they were approached by the company
NEW DELHI: In a development that could have serious repercussions, some members of the Public Accounts Committee of the Assembly probing the Rs. 150-crore smart card scam connected with the Transport Department have alleged that they were "approached'' by certain officials of the private company that is holding the smart card contract not to finalise the PAC report on the issue.
The PAC headed by senior Congress legislator S. C. Vats is probing allegations of irregularities in finalisation and allotment of the contract for issuing smart cards for registration of vehicles in the Capital. Lieutenant-Governor B. L. Joshi has referred the matter to the Central Vigilance Commission. The PAC was to meet on Saturday to finalise and adopt the report.
The matter has generated a lot of heat in the past also as the Leader of the Opposition, Jagdish Mukhi, has time and again made serious allegations of wrongdoing in allotment of contract by the Delhi Government to the private company Shonkh Technologies International Limited in violation of all norms.
It is learnt that despite provocations, the PAC met and not only finalised but also adopted the report clearing the decks for its introduction in the Assembly.
A majority of the Congress and the BJP members present in the meeting have apparently lodged their protests and complaints against the private company and its officials for having approached them to thwart the adoption of the report.
"Some people claming to represent Shonkh Technologies International Limited approached me late last night. They wanted that the PAC report should not be finalised as they had a point of view to make on the issue. They claimed that their company was being targeted by vested interests and, therefore, this report should not be finalised and adopted.
There are many other things that transpired during that meeting that I would not like to share with the media,'' said DPCC president Ram Babu Sharma.
Another Congress legislator, Meira Bhardwaj, also claimed that representatives of the company came to her house last night and impressed upon her not to allow the finalisation of the PAC report on smart cards.
The same allegation has also been made by the BJP MLAs on the Committee that include Sahib Singh Chauhan and Jai Bhagwan Aggarwal. It is learnt that the company officials approached even Dr. Vats. The firm was awarded the contract in Delhi in 2002.
92 Report of the Public Accounts Committee on ‘Privatisation of Power’
The Hindu Date:10/03/2006 URL: New Delhi Congress MLAs threaten to violate whip on PAC report
Staff Reporter
Issue likely to put the party in a soup if rebels defy the whip
The whip has come at the instructions of Chief Minister `The party high command has not been taken into confidence'
NEW DELHI: In a confrontation that could throw the ruling party in the Capital into turmoil, Congress Chief Whip Ramakant Goswami on Thursday evening issued a three-line whip asking the party MLAs to vote against the Public Accounts Committee report on the Rs. 150-crore smart card scam that had recommended a CBI probe into the whole deal.
What has further aggravated the situation is the decision of a large number of party MLAs to break the whip and vote in favour of passage of the report that was tabled in the Delhi Assembly on Thursday by its Chairman S. C. Vats.
The issue is not only likely to generate a debate on the issue of corruption and its endorsement by the Delhi Government but also put the party in a soup if the rebel Congress legislators go ahead and vote against the whip. Interestingly, the whip has come at the instructions of Chief Minister Sheila Dikshit who has come under pressure after the tabling of the PAC report on multi-crore scam in power privatisation process.
Insiders in the party were of the view that the party high command had not been taken into confidence before issuing the whip which was violative of Congress president Sonia Gandhi's directive for "zero tolerance'' on issues of corruption.
"If the party high command directs us to vote for covering up corruption we will not hesitate even once and endorse the whip. But if it is being done to favour of private company that has been indicted by the PAC for scam in issue of smart cards, then we will violate the whip and are ready to face the consequences as Ms. Gandhi has never favoured promotion of corrupt as was being done by misusing such powers,'' a senior MLA stated soon after their meeting at the Old Secretariat complex late on Thursday evening.
The rebel MLAs have by and large remained clam during this session and have cooperated with the Government on various issues.
It is also not known if DPCC president Ram Babu Sharma has been taken into confidence on the issue.
The three-line whip states that all members are required to vote against the passage of the fourth report of the PAC on smart card. 93 Report of the Public Accounts Committee on ‘Privatisation of Power’ "The issue of the private company offering bribes to the MLAs and members of the PAC for not allowing adoption of the report rocked the Delhi Assembly. These are serious allegations of corruption and the Chief Minister has decided to overlook these issues and side with those who have been accused of corruption and wrongdoing. The Lieutenant-Governor has already ordered an inquiry into the whole affair and issuing a whip certainly shows the Delhi Government in poor light,'' a senior Minister stated.
94 Report of the Public Accounts Committee on ‘Privatisation of Power’ Date:11/03/2006 – the hindu
PAC recommends CBI inquiry into smart card scam
Staff Reporter
Scathing indictment of the Delhi Government
`The entire tender process is illegal' `The antecedents of the vendor are suspect' `No justification for adopting untested technology' 'Any middle men need to be identified and punished'
NEW DELHI: In a scathing indictment of the Delhi Government in the multi-crore smart card scam, the Public Accounts Committee of the State Assembly has recommended that the entire matter be handed over to the Central Bureau of Investigation (CBI) for irregularities in the award of tender and showing undue favour to the private vendor, Shonkh Technologies International Limited.
The report, which was tabled in the Assembly on Thursday and passed on Friday, has come as a big setback to Chief Minister Sheila Dikshit who had tried to block its passage leading to a confrontation within the party. In its report, the PAC headed by senior Congress MLA S. C. Vats pointed out that there was no justification for adopting untested technology and this was done against the recommendation of the Apex Committee of the Union Government for introducing smart cards with microprocessor chip.
Taking up the matter of inter-operability, the report points out that information contained in the optical segment was not accessible to the hand held readers which would be available with the enforcement authorities and the traffic police. In this case, it can only be accessed by the computers of the department.
The report also strongly points out that favours were shown to the vendor. The claim of the vendor regarding its experience in supplying, installation, erection, commissioning, implementation and maintenance of similar goods anywhere in India or abroad and its support infrastructure facilities in Delhi were not verified.
"Moreover, contrary to the condition, the company declared that its facilities were in Gurgaon and not in Delhi and still the department found it fit to award the contract to the vendor.
The department proceeded with the tender process fully aware that only one vendor was going to be qualified.
It ignored the objections raised by the Deputy Secretary (Finance) and the committee constituted under the chairmanship of the Commissioner (Industries) which stated that the due process of tender had not been followed,'' it states.
95 Report of the Public Accounts Committee on ‘Privatisation of Power’ Further, the report states that the antecedents of the vendor were suspect. In spite of the fact that Securities Exchange Board of India (SEBI) had indicated that the activities of the company were under scrutiny, the contract was awarded to it.
The entire tender process was illegal as it was started and contracted at a time when it had no statutory backing of the Union Government.
Moreover, even the notification, which itself was repugnant to the central notification, did not have the approval of the Lieutenant-Governor.
"With the sole objective of favouring a dubious entity the department has burdened the common man monetarily. On the pretext of introducing latest technology, unscrupulous elements in the department collude with the monopolistic vendor to commit a huge fraud on the people of Delhi. Stringent and deterrent action needs to be taken against the officers responsible for this fraud. The Committee recommends that the entire matter should be handed over the CBI for a thorough probe into the acts and omissions on the officers of the Transport Department. Persons who have benefited from contract need to be identified and punished,'' the report states.
96 Report of the Public Accounts Committee on ‘Privatisation of Power’ Date:11/03/2006 – THE HINDU
New Delhi
Speaker's ruling saves the day for Congress
Staff Reporter
Setback for Sheila as Prem Singh rules that PAC report on smart card scam should be deemed as passed by the Assembly
NEW DELHI: In what is seen as a major setback to Chief Minister Sheila Dikshit, the Delhi Assembly Speaker, Chaudhary Prem Singh, on Friday termed the whip issued by Congress Chief Whip Ramakant Goswami as inappropriate and ruled that the Public Accounts Committee (PAC) report on the smart card scam should be deemed as passed by the Assembly as provided under 179(4) of the business of transaction rules.
Pouring cold water over the efforts of the Sheila Dikshit Government to block the passage of the PAC report prepared by senior Congress MLA S.C. Vats, the Speaker stated that the issue of whip on committee reports had been raised by Nationalist Congress Party MLA Ramvir Singh Bidhuri and some other BJP legislators.
He said according to the rules, the PAC does not function under the Delhi Government and is not subject to directions by the Government. "Rule 179(4) clearly states that there shall neither be a formal motion before the House nor voting. Reports which are not discussed by the House -- Public Accounts Committee stands at number one in this category -- are not subject to voting in the House and are deemed to have been passed on tabling itself," he stated in his ruling.
Mr. Prem Singh further elaborated that a whip is issued on issues where voting takes place and that is why the present whip was inappropriate. However, Mr. Goswami sought to raise a point of order that led to an uproar in the House with the BJP members asserting that ruling of the Speaker cannot be questioned. At this an obviously upset Mr. Prem Singh said under Rule 293 the ruling of the Speaker cannot be challenged and asked Mr. Goswami to take his seat. The ruling of the Speaker came as a bolt out of the blue for the Chief Minister's camp that had since last evening been claiming victory by having reined in the dissident MLAs by issuing a whip. Although a large number of Congress MLAs were for voting against the whip, they were prevailed upon by the senior leaders not to take this extreme step and let the Speaker do the needful.
As the passage of the vote was greeted with thumping of the desks, the Chief Minister was seen having serious consultations with Transport Minister Haroon Yusuf and Food and Supplies Minister Raj Kumar Chauhan. However, interaction was bare minimum with Finance Minister A.K. Walia who sits right next to her.
"The ruling of the Speaker is historic. We did not want to be a party to the endorsement of corruption as Congress president Sonia Gandhi has made it clear that all partymen will have to fight against corruption. We are happy that justice been done and those promoting corruption have been given a strong rebuff," senior Congress legislator Bhisham Sharma remarked. However, it is Ms. Dikshit who has come under a scanner for trying to bail out a private company by issuing a 97 Report of the Public Accounts Committee on ‘Privatisation of Power’ whip. The PAC has indicted the private company in the Rs. 150-crore smart card scam, accused the Government of bending all rules to oblige it.
98 Report of the Public Accounts Committee on ‘Privatisation of Power’ 99 Report of the Public Accounts Committee on ‘Privatisation of Power’ Date:11/03/2006 – THE HINDU
Passage of PAC report a jolt to Sheila camp
Staff Reporter
Issuing whip to block a report `discredits' loyalists; Speaker becomes rallying point
NEW DELHI: The Delhi Congress leadership's decision to issue a whip to the party MLAs over the Public Accounts Committee report on "smart card scam'' has "recoiled'' on the Sheila Dikshit camp. The loyalists are disillusioned by the passage of the report. The blame game is on within the camp with the accusing finger being pointed at the Chief Whip, Ramakant Goswami.
As for the dissidents, the Speaker, Chaudhary Prem Singh, has become a rallying point for many senior party leaders who went to the extent of raising slogans in his favour inside the Old Secretariat complex after he had given the ruling on passage of the report. Observers say that in the end it was Mr. Prem Singh who saved the Government from a crisis-like situation. Senior party leaders including Subhash Chopra, Pervez Hashmi, Tajdar Babar, Ram Babu Sharma, Bhisham Sharma, Mahabal Mishra and Vijay Lochav were seen praising Mr. Prem Singh for giving the historic ruling.
While a large number of loyalist MLAs are upset over the Speaker's "bold ruling'' that saved the Congress from a major crisis, the general feeling is that the entire situation has been mishandled and close aides of the Chief Minister have once again let her down by giving misleading advice. "What could further aggravate the situation is the fact that the whip was issued without the knowledge of the party high command to prevent tabling and passage of a sensitive report exposing corruption. The Government has been seen issuing a whip to save a private company from being exposed. This has raised suspicions about the role of those in the Government,'' said a senior loyalist MLA.
Many within the Dikshit camp are blaming Mr. Goswami for not having taken the Speaker or senior leaders in the party into confidence before issuing the whip to vote for rejection of the report. Another section of the party feels that issuing a whip for blocking a report that indicts officials and a private company had discredited the loyalist camp and it was an ill-advised move. "If Mr. Goswami has to run the show with the help of the whip every day, it does not augur well for Dikshit camp ,'' a loyalist MLA said.
100 Report of the Public Accounts Committee on ‘Privatisation of Power’ New Delhi - 12TH March 2006 – The Hindu
Undue favours shown by Govt.: PAC report
Sujay Mehdudia
`Vendor failed to fulfil pre-conditions'
NEW DELHI: After allegations of squandering of public money in privatisation of the Capital's power distribution network and in construction of the 140-MGD Sonia Vihar water treatment plant, the Sheila Dikshit is faced with charges of sacrificing the interests of consumers and playing havoc with the taxpayer's money to benefit a private vendor to the tune of crores in the "Rs.150- crore smart card scam" that has been exposed by the Public Accounts Committee of the Delhi Assembly.
"The Delhi Government granted an assurance of at least 40 lakh cards to the vendor at the cost of Rs. 370 per card although no such guarantee was mentioned in the tender documents. Moreover, in a blatant move that would profit only the vendor, it has been decided that in the event of the agreement not being extended beyond the period of five years, the Government would be bound to pay the vendor Rs. 50 per un-issued card. The power to extend the agreement has been bestowed upon the vendor. Thus, in case after the period of five years (that ends on June 2008), if the vendor fails to issue 40 lakh cards, he will get Rs. 50 per card just because his quota of 40 lakh cards has not been achieved. Instead of inserting a time-bound schedule and penalty clause, the department has offered the vendor a reward,'' the PAC headed by senior Congress MLA S. C. Vats has stated. According to the Committee, at a meeting held on February 6 this year, the Commissioner (Transport) had stated that about 5 lakh cards had been issued in three years. Even assuming that the vendor manages to issue 5 lakh cards in the remaining two years there would be a balance of 30 lakh cards. So the Department will have to pay Rs. 15 crores of public money as penalty to the vendor! Not only this, from the official records it appears that the competent authority -- the Lieutenant Governor -- did not approve the concession agreement and the draft and final notifications in this case.
"The fact that the tender was issued even before the Union Government had made it mandatory, the vendor had not fulfilled the pre-conditions, and by passing of the Lieutenant Governor clearly shows that the Transport Department was in a `hurry' to award the contract to Shonkh Technologies International Limited. Concern for general public, departmental procedures, taxpayer's money and authority of the Lieutenant Governor were of no importance to them,'' the Committee has stated.
101 Report of the Public Accounts Committee on ‘Privatisation of Power’ PAC lashes out at DERC
Staff Reporter – 13th March 2006
It has lost autonomy and credibility, says panel headed by senior Congress MLA S.C. Vats
NEW DELHI: The Public Accounts Committee report on privatisation of power tabled in the Delhi Assembly last week has raised serious questions about the actions and role of the Delhi Electricity Regulatory Commission (DERC) stating that it had lost its independence, autonomy and credibility over a period of time.
Questioning the role of the Commission, the PAC headed by Congress MLA, S.C. Vats, states that rather than safeguarding the interest of consumers at large it has acted as a hidden hand of the Government and power distribution companies. Referring to the issue of rebate, the PAC stated that in spite of the fact that the discoms had claimed excess rebate in violation of the Bulk Supply Agreement, no penalty, interest or late payment surcharge was allowed to be collected from them. Instead it ordered that Transco would have to pay penal interest if it does not calculate the rebate due to each discoms and make the payment within a day. Interestingly, this issue was not before DERC at all.
It said the Standing Committee of Parliament on Energy had also passed severe strictures against the working of DERC and discoms. The functioning of DERC should be strengthened and made more transparent so that it is able to function effectively as a watchdog of the interest of the consumers. Excess rebate was being calculated and deducted by the discoms resulting in short payment of bills despite the fact that it was specifically stipulated in clause 5.2(d) that the discoms will pay the full amount to Transco without deduction, set off or withholding on any account whatsoever unless otherwise agreed upon. The discoms will be required to pay a Late Payment Surcharge at a rate equal to 2.5 per cent per month on the amount delayed.
On the Voluntary Retirement Scheme (VRS) offered by the three discoms, the PAC report states that the VRS was neither mentioned in the tri-partite agreement with the employees of the erstwhile Delhi Vidyut Board nor in the agreements with the discoms. These were introduced by the discoms on their own. As per the agreement, the discoms would be allowed to include the expense on this account in their revenue requirement. The justification given was that this would reduce recurring cost and increase efficiency. This means that the expense on account of VRS would be indirectly borne by the consumers in the form of increased tariff. Similarly, in the absence of any barrier on the salary package of the executive or non-executives of the discoms, how could it be assured that recurring cost would reduce in future? There is nothing to stop the discoms from giving its executives more salary and benefits and then claiming it as an expense of its Annual Revenue Requirement. "This is yet another example of the Government acceding to the whims of the discoms at the cost of the consumer," it concludes.
102 Report of the Public Accounts Committee on ‘Privatisation of Power’ th Express News Service – 4 March 2006-03-16 PAC report protest: BJP MLAs evicted Report on power privatisation calls for a CBI and CVC investigation into the process.
New Delhi, March 3: BJP legislators protesting the alleged corruption in power privatisation were today evicted from the Assembly which unanimous approved the controversial Public Accounts Committee (PAC) report that called for a CBI and Central Vigilance Commission probe into the process.
BJP MLAs, led by Leader of Opposition Jagdish Mukhi, raised the issue of alleged corruption during the power privatisation process. The legislators shouted slogans and rushed to the well of the House to lodge their protest.
Mukhi said, ‘‘The Sheila Dikshit government should resign, as the State Assembly’s supreme committee — which has a Congress majority — has severely indicted the government.’’
Mukhi said he had been citing these charges, as enumerated in the PAC report, levelled for the past three years on this issue.
The government’s reply on the issue was diplomatic. CM Sheila Dikshit, when pressed for an answer, said the action taken report will be submitted in three months.
This was, however, not enough for BJP MLAs who tried to disrupt the proceedings of the Assembly.
This led the Speaker to order for their expulsion. The marshals then evicted BJP members from the Delhi Assembly.
Besides the furore over the PAC report, the government was also in a tight corner over the rejection of three proposed bills in the Assembly. Three select committees, dominated by Congress legislators, rejected the bills aimed at regulating groundwater and hiking of penalties in MCD and NDMC.
In this context, the Congress Legislative Party met today and the leader of the House, Sheila Dikshit urged the MLAs to be united. Dikshit loyalist, MLA Vinay Sharma charged Delhi state Congress president Rambabu Sharma for the growing corruption in the civic body and the present demolition drive.
103 Report of the Public Accounts Committee on ‘Privatisation of Power’ Smart cards issue: PAC for CBI probe – 5th March 2006 Press Trust of India New Delhi, March 4: The Public Accounts Committee (PAC) of the House has called for a CBI probe into the process of issuance of smart cards for vehicle owners in the ongoing budget session of the Delhi Assembly. The PAC, headed by Congress MLA S C Vats, a known Sheila Dikshit-detractor, is understood to have unanimously adopted the report on smart cards.
The report, which states that the process in its current form should be scrapped, will be tabled in the ongoing budget session of the Assembly.
The PAC is also understood to have indicted the government over the manner of issuance of smart cards, observing that the process was contrary to the statutory provisions laid down by the Central government and hence should be scrapped.
It states in the report that in keeping with the Central government’s notification, only a smart card with 4 kb microprocessor chip should be issued and the card should be kept optional for the non-commercial vehicle owner, which was not the case in Delhi, sources said.
The committee also recommends that the entire matter be handed over to the CBI for a thorough probe into the acts of omission by the officials of the transport department, they said.
According to the report, there was impropriety in the award of tenders for the issuance of smart cards and called for identification and punishment of the persons who have benefited from the contract, whether they are from the department or the vendor company or any middlemen.
The action taken by the department on the recommendations of the committee should be submitted to it within three months of the adoption of the report by the Assembly, the committee has reportedly stated.
104 Report of the Public Accounts Committee on ‘Privatisation of Power’ ASSEMBLY HOUR: Face-off avoided between CM and rebel MLAs
Smart Card report: No voting, rules Speaker
Express News Service New Delhi, March 10: THE politics over the Public Accounts Committee (PAC) report on Smart Cards took a new turn today, as the Speaker averted a face-off between Chief Minister Sheila Dikshit and rebel MLAs.
The Speaker gave his ruling that the report cannot be put up for voting, and that it stood passed by the Assembly.
The pro-CM group, led by Ramakant Goswami, had issued a whip for all Congress MLAs to reject the report.
However, the rebels didn’t want to vote against it, as it had been prepared by a prominent detractor, Dr S.C. Vats, who enjoys patronage of rebel lea-ders like Ram Babu Sharma.
The controversial 33-page report says, “Unscrupulous elements in the Transport Department colluded with the monopolistic vendor to commit a huge fraud on the people of Delhi.”
It recommended that the “entire matter should be handed over to the Central Bureau of Investigation (CBI) for a thorough probe into the acts and omissions of the officers of the Transport Department”.
The report was tabled on Thursday and was declared to be adopted, without voting, today.
However, Ramakant Goswami, stood up — after the Speaker declared it to be passed in the Assembly — to refer the report directly to the department concerned.
However, Singh rebuked him, as he cited Delhi Assembly’s Rule 293 which says the Speaker’s decision could not be questioned.
Bharatiya Janata Party MLAs, headed by Sahib Singh Chauhan who had raised this issue, had initially staged a walkout from the Assembly floor.
Later, the Speaker’s ruling led them to applaud. BJP’s leader of Opposition Jagdish Mukhi and state president Dr Harsh Vardhan asked for immediate scrapping of the Smart Card system, alleging a Rs 200-crore scam in the process.
105 Report of the Public Accounts Committee on ‘Privatisation of Power’
Pioneer – 13th March 2006 CM should worry about poor floor management
Reporter's Notebook / Sidharth Mishra
Left to them, the Congress leaders of Delhi are best at creating a mess of the best opportunities. Last week, Finance Minister AK Walia presented a people-friendly Budget, which was lapped-up by newspapers across the board. The infighting in the Delhi Congress, however, ensured that leaders failed to bask in the glory of the widely appreciated document.
The warlords, instead, chose to make mincemeat of each other on an innocuous report submitted by the Public Accounts Committee of the Assembly. I call it innocuous because the Public Accounts Committees are never expected to give certificates to the Government. On the contrary, they are meant to point out the deficiencies.
The practice in Parliament and some of the States is to allow the PAC to be headed by a member from the Opposition benches to carry out a fair assessment of the functioning of the Government. A PAC report has seldom been made into an issue of politics. Veteran BJP leader Murli Manohar Joshi is currently heading the PAC in Parliament.
Unfortunately, Delhi Assembly has been beset with controversies around the functioning of the PAC this year. The responsibility for lowering the functioning of the August body lies with both managers of the camp, led by Chief Minister Sheila Dikshit, and the dissidents, lead by Delhi Congress president Rambabu Sharma.
If the select leak of the PAC report to the media on the smart cards was odious, the attempt to get the report rejected on the floor of the House was obnoxious. It goes to the credit of Speaker Prem Singh that he saved the ruling benches from certain embarrassment by giving a valued ruling to diffuse the situation. However, I must add here that the Assembly Secretariat could have done better by getting the issue resolved much earlier and not letting it reach a flashpoint.
Coming back to infighting in the Congress, Chief Minister Sheila Dikshit has successfully continued all these years to implement her progressive agenda, despite the presence of dissidents wedded to antiquarian ideas. It's a common public perception today that Delhi Congress president Rambabu Sharma would go an extra step to embarrass his own party's Government.
However, what surprised all was that for the first time Chief Minister Dikshit looked unnerved and allowed Ramakant Goswami to issue a whip to reject the report. She for certain was advised wrongly by her floor managers, who instead of persuasion been using the rod to get the MLAs fall in line. Such methods seldom work in a democratic set-up.
Thankfully, better sense prevailed and she allowed a strategic truce. With a tremendous budget awaiting approval, the Chief Minister can certainly look forward to another fruitful year for the Capital despite the Congress dissidents.
106 Report of the Public Accounts Committee on ‘Privatisation of Power’ PAC for CBI probe into issuance of smart cards for vehicles Tribune News Service
New Delhi, March 4 Difficulties for the Sheila Dikshit government in the ongoing Budget Session of Delhi Assembly have increased with the Public Accounts Committee (PAC) of the House calling for a CBI probe into the process of issuance of smart cards for vehicle owners.
The PAC, headed by Congress MLA S C Vats, a known Dikshit detractor, is understood to have adopted the report on smart cards unanimously.
The report, which also states that the process in its current form should be scrapped, will be tabled in the ongoing Budget Session of the Assembly.
The PAC is also understood to have indicted the government over the manner of issuance of smart cards, observing that the process was contrary to the statutory provisions laid down by the Central Government and hence should be scrapped.
It states in the report that in keeping with the Central Government’s notification, only a smart card with 4 KB microprocessor chip should be issued and the card should be kept optional for the non-commercial vehicle owner, which was not the case in Delhi, the sources said.
The committee also recommends that the entire matter be handed over to CBI for a thorough probe into the acts of omission by the officials of the Transport Department, they said.
It is understood to have noted that there was impropriety in the award of tenders for the issuance of smart cards and called for identification and punishment of the persons who have benefited from the contract, whether they are from the department or the vendor company as well as any middlemen.
The action taken by the department on the recommendations of the committee should be submitted to it within three months of the adoption of the report by the Assembly, the committee has reportedly stated. Early on in the Assembly Session, the PAC’s report on power privatisation, which has recommended inquiries by CBI and CVC into the reforms process, was adopted by the House.
107 Report of the Public Accounts Committee on ‘Privatisation of Power’