Underlining the sick state of the power sector, the Comptroller & Auditor General (CAG) of India found out the non-performing assets (NPAs) of state owned lenders increased sharply in the past three years to Rs 11,762 crore.
In its audit report on Power Finance Corporation (PFC) and Rural Electrification Corporation (REC), the CAG said, during 2013-14 to 2015-16, REC and PFC disbursed loans amounting to Rs 47706.88 crore to Independent Power Producers (IPPs) and at the end of 2015-16, total NPAs of Rs 11762.61 crore for IPP loans was recognised in their books of accounts.
CAG said the NPA generation works out to a "significant" 21.72 per cent of the amount disbursed during 2013-14 to 2015-16.
CAG underlined several misgivings in the loan sanction and disbursal procedure of the two lenders. "REC and PFC estimated a higher tariff at the time of appraisal of loan proposals which resulted in a sanction of loans worth Rs 8662 crore in six cases where the levelised generation cost was higher than the actual levelised tariff, rendering the viability of the project doubtful," it said in a report.
“Assessment of experience of project promoters was based on individual judgement and promoters who did not have relevant sector experience were often found eligible for loans. Many of these projects could not be completed within schedule,” it said.
The audit also noticed diversion of Rs 2457.60 crore by the borrowers/promoters in five cases. The report claimed REC and PFC could not ensure end utilisation of funds by the borrowers.
“REC and PFC sanctioned additional loans for meeting cost overrun in a number of cases by relaxing conditions of internal prudential norms,” CAG said.
In a list of recommendations, the country’s apex watchdog asked the process of appraisal of loan proposals, their sanction and disbursement may be strengthened. “Monitoring mechanism may be strengthened to ensure that loans disbursed are used for the specific purpose for which they have been sanctioned and incidence of siphoning/diversion of loan funds are eliminated,” said CAG in its report.
It also suggested restriction of cost overruns facility to selected projects and independent verification of data submitted by the promoters.