Hyderabad: A performance audit report of the Kaleshwaram Lift Irrigation Project on the Godavari river has indicated that the entire project is going to be a white elephant for the state, said officials. The audit was conducted by the Comptroller and Auditor General (CAG) last year.
According to the confidential report of the CAG, which was reviewed by HT, as per the guidelines of the Union jal shakti ministry, an irrigation project can be considered economically viable only if the Benefit Cost Ratio (BCR) is 1.5 in normal areas. It means, for every rupee spent on the project, the benefit should be ₹ 1.50.
In the 2017 detailed project report (DPR) of the re-engineered Kaleshwaram project submitted to the Central Water Commission and approved in June 2018, the BCR was projected as 1.51. The CAG audit analysis in 2022 disclosed that the BCR was inflated by under-projecting the annual costs and overstating the value of annual benefits expected from the project.
The recent CAG audit analysis revealed that the BCR of the project is only 0.52, taking into consideration the annual costs, including interest on capital, operation and maintenance costs, electricity consumption costs and depreciation on civil works, pumps/motors and pipelines.
“This means that every rupee spent on the project would yield a meagre benefit of 0.52 paise, indicating that the project is not economically viable,” the report said.
{{/usCountry}}“This means that every rupee spent on the project would yield a meagre benefit of 0.52 paise, indicating that the project is not economically viable,” the report said.
{{/usCountry}}The project, when it was originally conceived as Pranahita-Chevella Sujala Sravanti (PCSS) in 2007 at an estimated cost of ₹38,500 crore, was aimed at providing irrigation to 1.64 million acres. After the project was re-engineered as Kaleshwaram, it was aimed to create a new command area of 18.25 million acres, besides stabilising another 470,000 acres. The project cost then shot up to ₹85, 596.58 crore.
“Thus, while the targeted command area increased by only 52.22% after re-engineering, there is an increase in the combined project cost by 122%. There were further additions and changes in the scope of the Kaleshwaram project works, as a result of which the project cost was projected to go up to ₹1.49 lakh crore,” the CAG report stated.
The CAG report pointed out that the previous government had resorted to massive borrowings in completing the Kaleshwaram project. In August 2016, it incorporated Kaleshwaram Irrigation Project Corporation Limited (KIPCL), a special purpose vehicle to mobilise funds for Kaleshwaram project.
As of March 2022, the KIPCL had concluded 15 loan agreements with banks and other financial institutions for an aggregate loan amount of ₹87,449.15 crore, which included an amount of ₹11.220.22 crore of interest during construction, which would be added to the principal amount of loan. These loans carry interest at the rates ranging from 7.8% to 10.9%.
As per the repayment schedules incorporated in the respective loan agreements, these loans were to be repaid in 12 years, either in 48 quarterly or 144 monthly instalments.
“As per the government orders issued while forming the KIPCL, the state government shall ensure flow of dedicated and substantial revenues to the corporation to repay loans. But it did not happen. In the absence of any sources of revenues to the KIPCL, the burden of repayment of these loans and interest thereon would ultimately fall on the state government,” the CAG report said.
It said in the coming years, the state government would require funds to the extent of ₹14,462 crore every year for servicing the debt raised for Kaleshwaram project. Besides, it would also require funds for operational expenses like the energy consumption charges to the extent of ₹10,374 crore for operating the lifts and operation and maintenance charges of ₹272 crore.
“Assuming that the project would be completed and would become fully operational from 2024-25, the requirement of funds for operation of Kaleshwaram project, including debt servicing in the coming years will be as high as ₹25,109,41 crore,” the CAG said.
If the government has to bear this burden, it has to make huge allocations to the irrigation sector in the annual budgets.
“In the last six years, the budget allocation made for the Kaleshwaram project ranged from ₹1,382 crore to a maximum of ₹5,072 crore. Thus, the total allocation made for the project in the last six years was only ₹27,137 crore of which only ₹18,659 crore was spent. So, even the allocated budget was not spent,” the CAG pointed out.