Cost overruns set to hit Jalayagnam - TeluguPeople.com News

HYDERABAD: Are the irrigation projects taken up by the State government economically viable? Will the proposed massive lift-irrigation projects get the required power to operate them? These are the two crucial questions in the minds of the people.

The latest CAG report on Jalayagnam found that the benefit-cost ratios (BCRs) of several irrigation projects were less than the benchmark and hence they were not economically viable. Moreover, the lack of power would make the lift-irrigation projects non-operative, even if they were completed.

The CAG findings: The Benefit-Cost Ratio (BCR) refers to the ratio between the net annual benefit and net annual cost of the project and tells us whether the proposed project gives value for money invested in it or not.

As per the norms fixed by the Planning Commission / Central Water Commission, a project is considered economically viable when the BCR is more than 1.5 in the case of projects taken up / proposed in normal rainfall areas and more in the case of the projects taken up/proposed in scanty rainfall or drought-prone areas.

As per the random checks conducted by the CAG, the BCRs of some projects are as follows:

PRANAHITA-CHEVELLA: The project BCR was estimated by the government to be 1.43. But, it understated the capital cost of irrigation component of the project.

The value of pre-project crop benefits was undervalued by taking less yield per hectare. If one takes these factors, the BCR will come around only 0.97.

HANDRI-NEEVA: The project BCR was estimated to be 1.8 by the government initially, but it was revised as 1.32. But, the net annual benefits were overstated by `647.68 crore.

Reduced project cost was taken for calculation. Crop benefits were taken on maximum prices rather than average prices. Loss in agriculture produce was underestimated. After taking these factors, the BCR will come to around 0.86.

NETTEMPADU: The BCR was estimated by the government to be 2.00 initially, which was revised as 1.65 later. But, cost of distributory network was understated.

Interest on capital cost was computed at 6 per cent instead of tariff fixed by APERC at Rs 2.41 per KWH for 2004-05. Several cost components were not included in the project cost. After considering these factors, the BCR will come to around 0.87 only.

GALERU-NAGARI: The BCR was estimated by the government to be 1.93 in 1990 and it was revised as 1.63 in 1993 and as 2.023 in 2006. But, several factors were ignored in calculating the BCR.

The interest on capital was computed at 4 per cent instead of the applicable rate of 10 per cent. The project cost has now increased to Rs 7,216.36 crore as against Rs 4,541.29 cr considered for computing BCR. Pre-project crop benefits were ignored. After considering these factors, the BCR will come to around 0.96.

Thus all the above cited projects have become economically unviable.

POWER COMPONENT: The lift-irrigation projects (LIPs) require electricity for running the motors and pumps to provide water to the ayacut.

Therefore, assured availability of adequate power assumes importance in planning and execution of LIPs. Out of the 74 irrigation projects taken up under Jalayagnam, 31 are LIPs (involving a total cost of Rs 1,18,996 cr).

The combined ayacut contemplated under these projects was 95.39 lakh acres. As per the information furnished by the Irrigation Department in July 2012, the total power required for these 31 LIPs was 8,746.37 MW - translating into nearly 210 million units (MU) per day.

The CAG made these observations on the power component in LIPs. The total installed capacity of power generation (including private and central sectors) of the entire state as of March 2012 was 16,069 MW.

The power required for the new LIPs, after their commissioning, would work out to nearly 54.43 per cent of the total installed capacity of the state.

The total power consumed in the entire state during 2011-12 was 69,848 MU. The 31 new LIPs, on their completion and commissioning, are estimated to consume 21,604 MUs of power during the pumping season, which works out to 30.93 per cent of the total consumption of the entire state at the 2011-12 levels.

More importantly, during the pumping season, the 31 new LIPs will require about 210 MUs of energy a day, which is more than the average daily energy consumption (of 191.36 MUs) of the entire state in 2011-12.

Andhra Pradesh is a power-deficit state and it purchases power from independent power producers every year at high rates. Even if the unit rate of Rs 2.60 chargeable by the power distribution companies (approved by the APERC for the year 2011-12) in respect of government LIPs is considered, the total funds required to meet the electricity consumption charges alone for these 31 new LIPs works out to Rs 5,617.04 crore every year.

The Irrigation Department replied to the CAG that out of the total requirement of 8,746.37 MWs for the 31 LIPs, two projects, i.e. Uttarandhra and Kanthanapally, requiring 329.95 MW and 878 MW respectively, were yet to be taken up and that the remaining LIPs would require a total of 7,538.42 MW.

It further stated that the requirement of the projects already commissioned, either fully or partly, as of March 2010 was only 254.14 MW and that all the remaining LIPs were scheduled to be completed only by 2017-18 and that by then there would not be any problem in supplying power to them as the State's installed capacity would be significantly higher.

The Department also referred to an assurance given by the APTransco regarding power availability for the LIPs, including Pranahita Chevella, wherein it was stated that the expected installed capacity of the state would increase to about 19,812 MW by March 2014 as against the estimated total power demand of 17,551 MW, and that power 'would be available to all the major LIPs.

However, the CAG rejected the ID's reply as not acceptable citing the following reasons: As per the contract period stipulated for the works of all the ongoing LIPs, 29 out of the 31 projects (except Uttarandhra and Kanthanapally projects) were originally scheduled for completion by 2014-15 and the power requirement of these LIS would have reached 7,538.42 MW by 2014-15 itself and not by 2017-18 as contended by the ID.

In response to a specific query from the CAG, the APTRANSCO furnished (in July 2012) an action plan on power requirements of AP, including LIPs, up to 2016-17, wherein it projected the capacity addition of 11,100 MW during the period from 2012-13 to 2016-17.

As per the information furnished (in June 2012) by the APTransco, despite the capacity addition, the state would still face energy deficit ranging from 11,339 MU to 32,894 MU during the five-year period 2012-17.

The increase in availability of power in the state as projected by the APTransco was based on assumptions like capacity addition of 11,100 MW, including huge addition of 5,212MW of wind and 380 MW of solar power, in the next five years: reduction of transmission and distribution losses from the present level of 18 per cent to 14 per cent by 2016-17; and, getting power share from Central generating stations like Vallur, Tuticorin and Neyveli and also from UMPP Cheyyur and UMPP Orissa-II. In the event of non-materialisation of any of these assumptions, the state would be under even more stress to provide the required power to the LIPs.

Further, considering the fact of crippling power shortage in the state in 2012 ' with the gap between demand and supply being 7413 MU from April to September (15.34 per cent of total demand for the period) ' provision of power to all the LIPs is for sure going to be a daunting task, the CAG said.