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Thursday, 07 March 2013 00:00
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Lessons from NHAI’s response to CAG on GMR road


Though the CAG’s final report on the National Highways Authority of India (NHAI) performance in FY13 is not yet out, the NHAI chief’s letter on this is chilling since RP Singh has described the CAG’s draft estimates of the losses caused as “sensational”. According to Singh, the CAG has totalled up the amount of funds the GMR Group had promised to pay NHAI over 30 years for the 555-km long Kishangarh-Udaipur-Ahmedabad national highway and come to a loss of R32,500 crore caused by NHAI not being able to get the necessary environment clearances as a result of which GMR walked out of the project last December. If the CAG’s final report does mention the R32,500 crore figure, that would be unfortunate for a variety of reasons.

For one, you cannot mechanically tot up 30 years of revenue streams since the correct procedure has to be to discount the stream—once you do that, the figure reduces to around R9,000 crore on a net present value (NPV) basis. Since that, in itself, is hardly a trivial amount, it’s not clear why the CAG chooses not to discount revenue streams as a matter of course in all its reports. In the case of the Coalgate reports where the CAG reduced the loss figures from R10.67 lakh crore in the draft report to R1.86 lakh crore in the final report by excluding underground mines (don’t they make profits?) as well as the mines given to PSUs (in which case, why did the 2G report include ‘extra’ spectrum held by PSUs?), the CAG did not discount the numbers. Had it done so, this would reduce the loss levels by around half. Yet, in the case of the Delhi airport where the CAG report put the earning potential from the land DIAL got as part of the airport deal at R1,63,557 crore over 58 years, discounting was done—in this case, the CAG said DIAL’s share would be R88,337 crore which, on an NPV basis, worked out to R4,187 crore. In the case of the Sasan ultra-mega power project where the promoter was allowed to use part of Sasan coal for another power project, the CAG put the financial benefit at R29,033 crore which, it said, worked out to an NPV of R11,852 crore.

Equally problematic is the issue of blaming NHAI for this loss since it is clear it was the environment ministry that was holding back the clearances and that the entire government system was unable to do anything about this for well over a year. While it may be a good idea to do the exercise from the point of view of knowing what delays in environmental clearances are costing the nation—and not just for highway projects—officials in the line ministry can hardly be held to blame.


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