Audit exposes Nu 578mn unresolved irregularities in hydropower projects

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Alka Katwal
from Thimphu

The three mega hydropower projects – Mangdechhu Hydroelectric Project Authority (MHPA), Punatsangchhu-I Hydroelectric Project Authority (PHPA-I), and Punatsangchhu-II Hydroelectric Project Authority (PHPA-I) – have a combined unresolved irregularities worth Nu 577.53mn, according to the Royal Audit Authority (RAA) report 2015.
Of the total Nu 396.843mn irregularities, MHPA resolved irregularities worth Nu 57.308mn prior to the compilation of the draft Annual Audit Report 2015. Therefore, the total unresolved significant irregularities in relation to MHPA amounted to Nu 339.535mn.
MHPA made excess payment of Nu 32.483mn during the construction of permanent colony at Dangdung in Trongsa for 19 extra items of works.
The audit report also points out that an additional amount of Nu 20.111mn was paid on account of disposal of excavated earth, resulting in illegitimate payment. Similarly, MHPA also made an overpayment amounting to Nu.3.151mn due to change in the specification of materials.
Part payment on road works without test report amounted to Nu 5.797mn and on-imposition of liquidated damages amounted to Nu 77.069mn
The RAA report points out that works on repair and maintenance of road between Langthel and Chunjapang, Package IV, was awarded at the tendered amount of Nu 39.231mn with the completion period of 10 months. However, the works were completed on 22 August 2014 with delay of 57 days, for which liquidated damages of Nu 2.807mn were not levied. The total non-levy of liquidated damages for MHPA amounted to Nu 198.118mn in 2015.
The review of records revealed that despite granting three time extensions, the contractors had failed to complete the works even in the extended time period. The audit report states that the same issue was raised even during the previous audit and the management during the Audit Exit Meeting had agreed to recover the liquidated damages. The management however had failed to take any action on the contractors.
PHPA-I reported Nu 306.764mn in irregularities, out of which Nu 242.866mn were either resolved prior to the compilation of the draft Annual Audit Report 2015 or were not material for inclusion in the AAR 2015.
The total unresolved significant irregularities for PHPA I amounted to Nu 63.898mn.
The RAA report states that for the PHPA I, the non-recovery of 13% interest from the contractor amounted to Nu 24.912mn. Similarly, the over-payment on account of extra 5% contractor’s overhead and profit amounts to Nu 38.575mn.
PHPA-I had made overpayment of Nu 38.575mn on account 5% contractor’s overhead and profit, which was not in line with the Clause 3.5 of the Center Water Commission (CWC) guidelines.
In addition, PHPA-I had also made excess payment of Nu 0.411mn to its officials on account of stipend during training in India. The excess payment had occurred due to payment made to officials at DSA rates instead of stipend.
Punatsangchhu-II had Nu 2,291.120mn in irregularities, of which Nu 2,117.023mn were either resolved or not material for inclusion in the audit report. The total unresolved significant irregularities for PHPA-II amounted to Nu 174.097mn.
PHPA-II had made excess payment of Nu 172.982mn on account of extra 5% contractor’s overhead in contradiction to the CWC norms and Guidelines.
The authority had also made payment of Additional Project Handling Allowances amounting to Nu 1.115mn to the staff of PHPA-I as the management for PHPA-I & II was the same and stationed in Thimphu.
Despite opening offices in Bjimethangka with separate offices for PHPA-I & II, the officials of PHPA-I were still paid the Additional Project Handling Allowances, which is not justifiable, according to the audit report.