The West Bengal government has accepted in full a special committee's report on CESC's Budge Budge thermal power project.
The report has attacked CESC's project management capacity, calling it "amateurish". It has also slashed the company's claim of project cost by Rs 455 crore.
The decision effectively reduces the cost of the project to Rs 1,853 crore, including power evacuation cost against CESC's claim of Rs 2,308 crore. The cost per mw will be Rs 3.71 crore against Rs 3.5 crore for the 420 mw second stage of the Bakreswar project for which orders were placed in July 1996.
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The 28-page report makes scathing remarks on the RPG group power utility's capability of managing a project of this size.
"There is hardly any evidence of scientific project management as far as Budge Budge is concerned. On the contrary, the project management, as undertaken, shows indifference and a somewhat amateurish attitude," it says.
CESC's poor project management, the study concludes, has caused time overruns resulting in an increase in interest during construction, which, in turn, will inflate the capital base. "Such increase in capital base will lead to larger profits in terms of reasonable return."
The committee found many of CESC's explanations regarding cost escalation unacceptable.
It also questioned whether CESC was "able to obtain the best price" in its purchase of the steam turbine and generator. While CESC paid Rs 432 crore for the two 250 mw sets imported from NEI Parsons, UK, the cost of two 210 mw sets for the Bakreswar project imported from Fuji, Japan, was only Rs 206 crore.
CESC, the report notes, has unjustifiably blamed boiler supplier ABL for the project's delay. The company has also blamed the Union ministry of forests and environment for the delay.