An investigation by the Centre for Science and Environment (CSE) reveals contravention of one project-one proponent norm in the National Solar Mission. CSE's investigation shows that these guidelines were blatantly flouted by Lanco Infratech, the flagship of the Lanco Group.
In the first batch under the Mission, the projects were to be equitably distributed among companies so that it not only fosters competition but also provides room for innovation and growth. The Ministry of New and Renewable Energy set the rules for distribution of projects.
Selection norms
According to the Ministry's selection guidelines, it will accept only one application for one five megawatt solar photovoltaic project “per company, including its parent, affiliate or ultimate parent or any Group company…”
In the case of solar thermal projects, the guidelines specify “total capacity of solar thermal projects to be allocated to a Company… shall be limited to 100 megawatt”.
Therefore, one company was allowed to bid for and win one 100 MW solar thermal and one five MW solar photovoltaic project. In totality, one company was eligible to get 105 MW worth of projects.
No monitoring
CSE investigators point out that Lanco could pull this off because neither the Ministry, nor the NTPC Vidyut Vyapar Nigam (NVVN) – responsible for the contracting, buying and selling of solar power – have a mechanism to monitor the activities of companies that win a contract.
Lanco Infratech floated front companies and grabbed no less than nine projects worth 235 MW. This is about 40 per cent of the 620 MW projects auctioned by the Government during the first batch of the first phase of the Solar Mission.
NVVN's defence
When contacted, the NVVN CEO, Mr Anil Kumar Agrawal, said, “NVVN has selected the bidders as per the guidelines issued for Batch 1. According to the guidelines, participation in the RFS (request for selection) had to be one company, one project. While submitting the RFS, companies had declared that the no affiliate, group or parent company is participating in the bidding.”
“NVVN also checked and found that the companies selected were not inter-linked – group, affiliate or parent. Accordingly, power purchase agreements have been signed with independent companies. Further, there is no bar in the guidelines for a company to be EPC contractor in more than one project.”
Shareholding
After signing the power purchase agreements, NVVN noted that controlling shareholding in some of companies appeared to have changed, which was in violation of guidelines, he said, adding that on obtaining legal opinion NVVN issued notice of default to such companies.
“Although companies stated that they had not violated the provisions of guidelines and it was a matter of interpretation. However, in order to resolve the issue the companies concerned finally have rectified the default and the controlling shareholding (equity+ preference share capital) of promoters at the rate of minimum of 51 per cent is now with the companies with whom PPA have been signed,” he said.
Assured revenues
Based on the guaranteed feed-in tariff being paid to solar projects in the first phase, Lanco Infratech will get assured revenue of Rs 13,000 crore from these projects over a period of 25 years, says CSE. The company has initiated work on these nine projects on 1,000 hectares at Askandara village in Jaisalmer, Rajasthan.
In the winning bids for solar thermal projects, Lanco's name appears only in the case of Diwakar Solar Projects, which has bagged a 100-MW solar thermal contract. Another Lanco subsidiary, Khaya Solar Projects, appears on the approved list of 5 MW solar photovoltaic project proponents.
Intricate links
CSE found that seven more companies had direct links with Lanco – some have Lanco employees and their family members as directors, while others have strong commercial ties to the company. Lanco's own annual report indicates that all the seven are firmly in its control.
The investigations also reveal that all seven companies had Rs 1 lakh or Rs 10 lakh in equity, no assets or reserves from the past, were created for the bidding process, companies increased their authorised amount of shares and then issued preference shares on the same day (December 31, 2010), the shares did not go to Lanco directly, but show up in its annual report.