After months of stalemate, the government on Wednesday finalised its contract for execution of the government of India-funded power projects with some central public sector undertakings (CPSUs) which were “handpicked” by the state’s power department. The government has now agreed to pay profit margins of eight percent and 8.5 percent to the PSUs for implementation of transmission and distribution projects, respectively.
J&K’s state power minister Nirmal Singh and finance minister Haseeb Drabu, along with officials from the power development department, held a meeting with union power secretary, chairman rural electrification corporation limited, chairman and managing director power grid corporation of India limited (PGCIL), chief executive officer REC-power distribution company limited (RECPDCL), CEO–REC transmission projects company limited (RECTPCL), over the controversial issue which was pending decision for more than a year.
For transmission works, the PSUs will get 8 percent profit margins of the total project cost as implementation and monitoring charges, while as for distribution projects, the government will pay 8.5 percent profits margins to them, the meeting decided.
“During the meeting certain issues pertaining to re-negotiation of project implementation agency (PIA) charges for transmission and distribution and RE works were discussed. It was decided that the charges would be 8 percent for transmission works and 8.5 percent for distribution networks,” an official statement said.
The RECPDCL, PGCIL and RECTPCL are the project implementing agencies.
In November 2017, the central power ministry had asked the state power department to award the contract for execution of over Rs 2500-crore prime minister’s development plan (PMDP-rural), PMDP-urban, Deen Dayal Upadhyaya Grameen Jyoti Yojana (DDUGJY), Restructured Accelerated Power Development and Reforms Program R-APDRP-II and Integrated Power Development Scheme (IPDS), at profit margin of five percent as project implementation charges and one percent as project monitoring charges. The state power department was asked to renegotiate with the PSUs for total profit margins of six percent.
The directions from the union ministry had come after the power department, without inviting tenders, picked up the PSUs at the profit margin of around 12 percent—six percent higher than the approved margin. An official however said that the overall profit margins for the PSUs would have gone up to 14 percent.
In wake of the directions, the state power department held fresh negotiations with the PSUs. However they only offered 0.25 percent cut in the 9.75 percent profit margins as PIA. No reduction was offered in one percent monitoring charges.
The schemes are meant for strengthening distribution system and up-gradation of power supply in rural Kashmir.
Amid the stalemate, the power department then sent a fresh proposal to the cabinet for its clearance for awarding projects following the meeting. The cabinet had however turned down the offer from the PSUs and sought further negotiations for bringing down the profit margins quoted by the PSUs.
Today’s meeting was scheduled to be held in Jammu on January 10 in power minister’s chamber.
An official however said that the meeting had to be cancelled at the last minute. He said that the meeting couldn’t take place as the PSUs had sent a “lower-rung official” for re-negotiation.