The stage-I of the 195-MW Integrated Kashang Hydro Electric Project, implemented by the Himachal Pradesh Power Corp Ltd, was completed with an outlay of Rs 789.84 crore against estimated cost of Rs 478.02 crore, a cost overrun of Rs 311.82 crore.
With this, the per unit generation cost of Stage-I, which is 65 MW, had increased from Rs 2.85 to Rs 4.78 against the prevailing rate of Rs 2.20 per unit.
The Stage II and III of the project are scheduled to completed in January 2021.
The CAG says the Asian Development Bank loan received through the Government of India in the shape of 90 per cent grant (Rs 498 crore) and 10 per cent loan (Rs 55.44 crore) was converted into 100 per cent loan by the state, placing an extra burden of Rs 651.82 crore, including interest of Rs 152.83 crore, on the project cost.
The total estimated cost of the hydro project in Kinnaur district was Rs 966.21 crore and the project was to be completed by November 2015.
An expenditure of Rs 1,169.75 crore was incurred till March 2017, a cost overrun of Rs 203.54 crore, said the CAG report tabled in the assembly.
The auditor picks holes in the company's failure to sell certified emission reductions or carbon credits.
A Certified Emission Reduction Purchase Agreement was signed between company and Future Carbon Fund for sale of certified emission reductions valuing $5,945,000 at the rate of $7.25 per carbon credits. These are to be delivered from April 2015 to April 2021.
However, Future Carbon Fund has rejected the validation report made by M/s TUV Rheinland due to non-inclusion of environment issues of Lippa village, located in the project vicinity, and inconsistency of report with documents submitted to the Asian Development Bank.
Upon achievement of milestones, the company would have received Rs 31.50 crore, including reimbursement of Rs 0.58 crore registration fee deposited with the United Nations Framework Convention on Climate Change (UNFCCC), even before actual delivery of certified emission reductions or commissioning of the project.
However, due to termination of Certified Emission Reduction Purchase Agreement, the carbon credits could not be realised despite fulfilling the milestones.
Since the termination of the agreement, market for certified emission reductions has slumped.
Its average price ranged between $0.24 and $0.72 from August 2013 to April 2017.
The company would not be able to sell certified emission reductions at the rate of $7.25 per unit fixed as per the agreement even if it tries to sell it to other buyers, the CAG observed.
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