WORLD BANK FUNDED PROJECT AUDIT REPORT POWER GRID CORPORATION OF INDIA LIMITED NORTH EASTERN REGION POWER SYSTEM IMPROVEMENT PROJECT (NERPSIP) IBRD FUNDED PROJECT FINANCIAL STATEMENTS oxyof PERIOD:- APRIL 2016 TO MARCH 2019 CONDUCTED BY C K PRUSTY & ASSOCIATES CHARTERED ACCOUNTANTS PLOT NO 6A, DEVI NAGAR-A, KALWAR ROAD, JHOTWARA, JAIPUR -302012 EMAIL:CAKAILASHCHOUDHARY@IMAL.COM Annexure to Audit Report As per the Loan Agreement executed between Government of India (GOl) and International Bank for Reconstruction and Development (IBRD) bearing Loan No 8631-IN for the project "North Eastern Regional Power System Improvement Project (NERPSIP), GOI and Power Grid Corporation of India Limited (POWERGRID) shall be responsible for the Project Financial Management Arrangements required to accomplish the project. IBRD will provide loan to Ministry of Power (MOP), Govt of India and MOP will pass the same to POWERGRID acting as an Implementing Agency (IA). GOI has selected POWERGRID as the Project Implementation Entity (PIE to implement the NERPSIP in dose coordination with participating state power departments and state power utilities in accordance with the participation agreement that was signed separately between POWERGRID and power utilities and department of Participating States. The Project Agreement between POWERGRID and IBRD was signed &executed in the month of November2016. As per the Loan agreement executed between GOI and IBRD project will be financed in the following manner: Project Component Project Cost US$ IBRD Financing US$ GOI Financing US$ million million million Component A: 937.60 468.80 468.80 Priority Investment component for strengthening of Intra-state transmission, Sub transmission and distribution system Component B: 13.4 0.00 13.40 Technical assistance for capacity building and Institutional Strengthening(CBIS) of power utilities and departments Total Project Costs 951.00 468.80 482.20 Front end fee 1.20 1.20 0.00 Total Financing 952.20 470.00 482.20 Required MAJOR OBSERVATIONS 1. Non adjustment of Advances There is contract agreement between Powergrid and Contractor in which after making stipulated initial advance Contractor has to dispatch material at construction site. During the course of audit it has been observed that there are various packages where advance payments have been released but no adjustments have been made till 31/03/2019. The following are 19 packages against which advance payment have been made up to 31/03/2019 but adjustment not yet started till 31/03/2019. Date of Total SNo. VENDOR Package No Advances Advance(Am ount in El Millions) 1 EMC Ltd., Kolkata TRPTWO1 16-Oct-17 29.01 TRPTWO1 20-Jun-18 6.22 TRPTWO2 16-Oct-17 41.28 TRPTWO2 20-Jun-18 9.17 TRPTWO3 16-Oct-17 24.01 TRPTWO3 20-Jun-18 8.86 2 Power Mech Projects NAGSSO4 21-Feb-18 34.17 Limited NAGSSO4 28-Mar-18 18.03 NAGSSO4 28-Dec-18 34.17 3 Shyama Power India Ltd. NAGTWO6 25-Aug-18 68.30 NAGSSO3 31-Mar-18 17.75 MANTWO6 25-Aug-18 53.72 4 Simplex Infrastructures ASMTWO7 09-Nov-18 35.74 Limited ASMTWO7 19-Mar-19 9.77 5 Sterling & Wilson Pvt. Ltd. MANSSO1 27-Mar-18 26.28 MANSSO1 18-Jun-18 16.81 MANSSO3 27-Mar-18 25.52 MANSSO3 18-Jun-18 17.18 6 Techno Electric & Engg. 19-Jun-18 49.33 Co. Ltd.NASO Total _525.34 2. Physical Verification Contractor: M/s Techno Electric & Engineering Co. Ltd. We have conducted physical verification of store of Meghalaya (MEG)- SS-02 which includes following sub station - Sr. No Name of Sub station 1 220/132kV New Shillong (New) S/S-2*160 MVA, 2*50 MVA 2 220/132kV Mawngap (New) S/S-2*160 MVA 3 220kV Byrnihat Extension During physical verification we have observed following discrepancies: 1. The site office was not keeping SAP related inventory reports on real time basis in order to verify the quantitative details of the inventories. II. It was observed that for some supplies billing was done by contractor to PGCIL very soon while supplies were unused till audit date. Ill. The manual stock register was not updated on regular basis. 3. Fund Reconciliation Statement as on 31/03/2019 (Rs. In crores) Sr. Particular Project Capacity Consultancy Service Total No. Cost Building Fee Tax/GST 1 Total fund received till date 1,653.49 29.66 307.38 49.83 2,040.31 2 Utilisation 1,075.12 0.44 157.51 49.83 1,282.91 3 Closing Balance 578.37 29.22 149.82 0.00 757.41 Reconciliation statement of fund balance with bank balance (Rs. In crores) Sr. Particular Amount No. 1 Balance as per bank as on 31/03/2019 808.24 2 Less : Cheques issued but not presented for payment 13.47 3 Bank book balance as on 31/03/2019 794.77 4 Consultancy Fee to be remitted to CC as on 31-03-19 28.61 5 Closing balance in designated bank account(As per IFR) as on 31/03/2019 766.16 4. Review of IFR and Quarterly financial report As per the office memorandum issued by Ministry of Power, Govt. of India dated 1st day of December 2014; POWERGRID needs to submit quarterly report to MOP indicating financial and physical progress of implementation of activities covered by this sanction. We have reviewed Qua rterly financial report (Utilization Certificates) as on 31/03/2019 submitted to MOP and found that the total unspent balance as on 31/03/2019 is Rs.757.41crores but as per IFR the closing balance in designated bank account for the same date is Rs.766.16crores. As reported to us by management the difference is due to flexi interest portion amounting to Rs.8.74 Cr. which is to be transferred to Ministry of Power. 7' ;\~h