Irregularities worth Nu 1.77bn of three hydropower projects

The three hydropower projects – Punatshangchhu-I Hydroelectric Project Authority (PHPA-I), Punatshangchhu-II Hydroelectric Project Authority (PHPA-II), and Mangdechhu Hydroelectric Project Authority (MHPA) – have irregularities amounting to Nu 1,771.93mn in 2018.

This is according to the Annual Audit Report 2018 that was launched by the Royal Audit Authority yesterday.

The irregularities of PHPA-I was reported at Nu 1,006.913mn, followed by PHPA-II at Nu 657.019mn and MHPA at Nu 107.995mn.

The irregularities, non-compliance to laws and rules involved 61.48% amounting to Nu 1089.298mn, while shortfalls, lapses and deficiencies comprised 38.52% amounting to Nu 682.630mn.

The PHPA-II had irregularities of Nu 606.310mn, representing 55.66% of the irregularities reported under non-compliance to laws and rules, followed by PHPA-I with Nu. 480.992mn representing 44.16% of the irregularities reported.

PHPA-I had irregularities amounting to Nu 525.921mn, representing 77.04% of the irregularities reported under shortfalls, lapses and deficiencies, followed by MHPA with Nu 105.999mn representing 15.53% of the irregularities reported.

The RAA finds no irregularities reported under fraud, corruption, embezzlement, and mismanagement in the three hydro projects.


In non-compliance to laws and rules, the overpayment due to incorrect computation of labor wages was reported highest at Nu 308.590mn.

Additionally, the reimbursement of central excise duty amounted to Nu 120.152mn and excess payment lead by incorrect rate analysis for cement at Nu 52.250mn.

In shortfalls, lapses, and deficiencies, Nu 430.768mn was reported from avoidable payment because of analyzed rate.

The excess payment due to unauthorized change of base index of Water Power ingénierie series from 1993-94 to 2004-05 for price adjustment was also included that accounts to Nu 40.930mn.

Irregular payment of pay arrear to Water and Power Consultancy Services Limited (WAPCOS) amounted to Nu 36mn and irregular payment of arrear of Bhutan Compensatory Allowance accounted at Nu 18.223mn.


Most of the irregularities in non-compliance to laws and rules were in lieu with the non-adherence of contract provisions amounting to Nu 310.830mn for strengthening measures in powerhouse complex, followed by an excess payment of Nu 295.480mn resulted due to incorrect computation of rate analysis for deviated items of work.

While shortfall, lapses and deficiencies were for excess payment on children education allowance amounting to Nu 0.499mn and non-realization of service tax from Indian government reported at Nu 50.210mn.


The amount of Nu 1.996mn was not recovered by the project nor the contractor had initiated any measures to rectify the defective work of constructed cladding wall amounting it was not built as per the required strength.

On the shortfall, lapses and deficiencies front, Nu 19.236mn was accounted for excess payment made to the contractors on rate analysis by including interest on machineries provided by MHPA.

There was also irregular payment of Nu 28.610mn provided to consultancy charges to National Hydroelectric Power Corporation, additionally excess payment of Nu 26.720mn for compression scheme. Moreover, extra payment of Nu 13.756mn towards royalty charges to contractor. The extra payment was also made due to higher linking factor in price adjustment of project amounting to Nu 8.968mn in price adjustment in the project and Nu 8.709mn extra payment to contractor due to adoption of incorrect base month in extra or deviated items.

Thukten Zangpo from Thimphu