HYDERABAD: The re-engineered Kaleshwaram Lift Irrigation Scheme (KLIS) is economically unviable, the Comptroller and Auditor General (CAG) said in its ‘Performance Audit on Kaleshwaram’ report that was tabled in the Telangana Legislative Assembly on Thursday.
Pointing out several lapses, the CAG said in its report: “The audit analysis revealed that the re-engineered Kaleshwaram project was economically unviable, ab initio. In the DPR, the benefit-cost ratio was inflated by under-projecting the annual costs and overstating the value of annual benefits expected from the project.”
It said that the benefit-cost ratio of the project was inflated; even with the understated project cost of Rs 81,911.01 crore, the ratio works out to 0.75. Considering the latest likely project cost of Rs 1,47,427.41 crore, the ratio becomes 0.52.
This means that every rupee spent on the project would yield only 52 paise. It indicates that the project was, ab initio, economically unviable. The CAG said that debt servicing would be a big burden on the government.
“The Kaleshwaram Irrigation Project Corporation Limited (KIPCL)/ government requires a total amount of Rs 1,41,544.59 crore (ranging from Rs 712.44 crore to Rs 14,462.15 crore every year) in the next 14 years for debt servicing. There are no orders from the government regarding the funding pattern for the project, duly indicating the proposed funding from the state Budget and funding proposed through other sources including market loans. The absence of a comprehensive plan duly spelling out the sources of funds for a project of this scale, which will have a long-term impact on the finances of the state, is an indication of improper planning and ad-hocism,” the CAG pointed out.
'improper planning, ad-hocism’: Major findings
The cost of KLIS is now likely to exceed Rs 1,47,427.41 crore, as against the Rs 81,911.01 crore projected to the CWC
The state government has not accorded administrative approval to the project as a whole and instead, it has issued separate approvals — as many as 73 administrative approvals aggregating to Rs 1,10,248.48 crore; there are no orders from the government about the funding pattern for the project
Of the total expenditure of Rs 86,788.06 crore incurred on the project (March 2022), Rs 55,807.86 crore (i.e., 64.3%) was met from the off-budget borrowings raised by KIPCL
The benefit-cost ratio of the project was inflated. Even with the understated project cost of Rs 81,911.01 crore, it is 0.75. Considering the latest likely project cost (Rs 1,47,427.41 crore), the ratio becomes 0.52, which means that for every Rs 1 spent on it would yield only 52.
The peak energy demand, when all the pumps are operated, is more than the average daily energy availed in the entire state (2021–22). Providing power to the lift irrigation scheme will pose a challenge to the state
The absence of a comprehensive plan duly spelling out the sources of funds for a project of this magnitude, which will have a long-term impact on the finances of the state, is an indication of improper planning and ad-hocism
KLIS burden: Over Rs 1.41 L cr to be paid over next 14 years to service debt
Assuming that the KIPCL draws the entire sanctioned loan amount of Rs 87,449.15 crore and starts repayment without any further extensions, the KIPCL/government is required to pay a whopping Rs 1,41,544.59 crore in the next 14 years for debt servicing from 2022–23 to 2035–36. Of this, the principal will be Rs 87,369.89 crore and the interest Rs 54,174.70 crore
The CAG pointed out that against the targeted command area (CA) of 18.26 lakh acres, the CA created was 40,888 acres.
Contract management
The CAG said that the works under KLIS were awarded at different points in time between 2008–2020 to a varied set of agencies.
While 17 contracts were awarded on an EPC basis, 39 were awarded on a unit price (lumpsum) basis. It was seen that in 21 of the 56 works contracts entrusted under the project, the scope of work involved the supply and installation of lifts. The department provided a total of Rs 17,653.71 crore towards the cost of pumps, motors and auxiliary equipment, without assessing the market rates.
The audit verified the actual cost at which the contractors procured the equipment (from M/s Bharat Heavy Electricals Ltd.) in four works and found that amounts (Rs 7,212.34 crore) provided for this equipment in the estimates were Rs 5,525.75 crore more than their actual cost (Rs 1,686.59 crore). Even when 30% of the estimated cost is allowed for the items/operations outside the scope of BHEL supply and another 20% towards overheads and contractors’ profit, the possibility of undue benefit of at least Rs 2,684.73 crore to the contractors of these works cannot be ruled out.
Power consumption
As of March 2022, the state has a total installed power generating capacity of 18,069.04 MW (including central and private sectors). As compared to this, the power requirement of the Kaleshwaram project alone (8,459.10 MW) works out to 46.82% of the total installed capacity in the state. The DPR did not provide any analysis regarding the power availability in the state and the sources from which power would be provided for the project.
The total capacity was assessed at 4,627 MW and the power consumption was worked out at 13,558 MW per annum. The project would require Rs 10,374.56 crore towards energy charges every year, the CAG said.
Report points to Glaring discrepancies
Against the targeted command area of 18.26 lakh acres, the works entrusted so far (March 2022) included the development of a distributary network for only 14.83 lakh acres. The actual command area created was 40,888 acres only (March 2022).
The department showed undue haste in awarding works. As many as 17 works costing Rs 25,049.99 crore were awarded even before approval of the DPR.
In the DPR, water for the project was proposed to be lifted from the Godavari river at the rate of 2 tmcft per day. The pumping capacity was later increased to 3 tmcft per day involving an additional cost of Rs 28,151 crore.
Due to the re-engineering of the Pranhita project and changes made in the project works, certain works already executed had become redundant, resulting in a loss of Rs 767.78 crore.