CAG faults NPCIL for cost overruns on Kudankulam Nuclear Power Plant

The Comptroller and Auditor General has faulted Nuclear Power Corporation of India Ltd (NPCIL) in execution and operation of Units I and II of Kudankulam Nuclear Power Plant in Tamil Nadu that resulted in delays and subsequent escalation of cost. The national auditor also held Russian energy behemoth Atomstroyexport responsible for the missed deadlines in supplying equipment.

“The scheduled date of completion was postponed from October 30, 2007 to December 31, 2011 for Unit I and from October 30, 2008 to December 31, 2012 for Unit II, inter-alia, due to delayed completion of different activities, of which many were attributable to the M/s Atomstroyexport (ASE), a company responsible for undertaking the Russian scope of work,” the CAG report tabled in the Parliament on December 27th read.

The national auditor noted that the initial estimated cost of the Kudankulam Nuclear Power Project (KKNPP) Units I and II was Rs 13,171 crore in 2001, which gradually rose to Rs. 22,462 crore in 2014. There were major delays in start of commercial operations of Units 1 and 2 by 86 and 101 months respectively due to “delayed supply of equipment or working documents by overseas collaborating partner, changes in design, additional works, erection delays etc”. CAG said that despite delays on the part of the Russian firm, the NPCIL did not initiate any claim for recovery of additional expenses of Rs. 264.79 crore.

CAG raised questions about the financial management of the whole project by NPCIL, the only company producing nuclear power in India. It is responsible for setting up nuclear power plant at Kudankulam in a phased manner. Units 1 and 2 have already been commissioned; and work is in progress on the next two units and a contract has been signed for the 5 and 6 units.

Pointing at imprudent financial management on the part of NPCIL, the report said: “…. There was no revision of schedule of repayment of the Russian credit. This resulted in start of repayment of Russian credit, before revenue generation, causing an additional interest burden on NPCIL to the tune of Rs. 449.92 crore.”

Apart from the Russian credit, NPCIL opted for external borrowing at a higher interest rate resulting in additional cost of Rs. 76. 02 crore. The state-run NPCIL has taken a term loan of Rs. 1,000 crore from HDFC Bank in violation of Central Vigilance Commission’s guidelines.

CAG also raised objection at the ‘technical competency’ of NPCIL as reflected in the period for which Unit 1 of Kudankulam was shut down. “Unit 1 of KKNPP was shut down from 24th June 2015 to 31 January 2016 for 222 days as against the planned period of 60 days. This was due to decision of NPCIL to shut down the plant or execute the refuelling work on its own without evaluating its technical competency,” CAG observed, while adding: “The extended shutdown resulted in revenue loss of Rs 947.99 crore to the NPCIL.”

CAG recommended that in all cases of rescheduling of commissioning dates, the repayment schedule for Russian credit may also be revised accordingly and that for all future planned shutdowns NPCIL may do “a competency analysis by mapping with a structured breakdown analysis, to take timely decision, if required, for engaging external consultants to avoid prolonged shutdown and consequential revenue loss”.

The Russian firm has been suggested to take care of the future delays by sequencing the supplies with the various stages of production. It primarily asked NPCIL to take timely action for recovery or adjustment for non/defective supply of material by ASE.

Opposition to Nuclear Energy

The opponents of nuclear power are citing the CAG report to buttress their claims over nuclear energy being unsafe. However, experts see a ‘far-fetched’ co-relation. “It (linking CAG report with nuclear safety) is a little far-fetched. The CAG is an accounting agency, it does not have any capability to assess safety features,” Lydia Powell, Head of Center for Resources Management at the Observer Research Foundation told Nuclear Asia.

She also added that cost overruns in big energy projects are “nothing unusual”. “Cost overruns and delays are nothing new in India or in big energy projects to make anything out of it going too far,” Powell added.

The Union Minister of State (Independent Charge) of the Ministry of Development of North Eastern Region (DoNER), Minister of State Prime Minister’s Office, Personnel, Public Grievances & Pensions, Atomic Energy and Space, Dr Jitendra Singh said in a written reply in Lok Sabha that the delay in completion of Units 1 & 2 of the Kudankulam plant resulted in shortfall in the achievement of nuclear power generation target. “The project completion was delayed on account of local protests in 2011 severely impeding work for about six months and its domino effect, litigations against the project in courts and fulfilling of directions of Supreme Court by NPCIL and other agencies. The Government and NPCIL enhanced public outreach manifold to allay the apprehensions and concerns of local people about safety of the project and all related issues,” Dr Singh added.

India presently has a fleet of 22 nuclear reactors generating 6,780 MWe. The installed capacity is expected to increase gradually to 22,480 MW by 2031.

Talking about the utility of atomic power, Dr Singh in a separate answer added: “Nuclear is a clean, environment friendly base load source of power available 24X7. It also has huge potential which will ensure long term energy security of the country in a sustainable manner. Therefore nuclear energy is an important component of the country’s energy mix and is being pursued along with other sources of energy in an optimal manner.”