Auditor General's Office Demands Recovery of Rs 26 Billion in Electricity Arrears from Industries

Kathmandu. The Office of the Auditor General has directed the recovery of premium arrears for electricity used by industries through dedicated feeders and trunk lines. The 63rd annual report published by the Auditor General has again asked to collect the arrears from the businessmen. According to the report, the authority has to recover arrears of 26 billion and three crore rupees from the businessmen. The Auditor General's Office has been asking the authority to recover arrears from businessmen since the 60th report. Similarly, the Auditor General's report has pointed out serious negligence and irregularities in the collection of tariffs, approval of investments, electricity purchase agreements, and procurement of equipment within the Electricity Authority. According to the report, the authority has not been able to recover more than 52 billion rupees in arrears from industrialists and government bodies. Similarly, it has been found that more than 56 billion rupees have been invested in subsidiary companies without the approval of the government. In addition, the Auditor General's Office has pointed out that the state has suffered losses of crores due to the purchase of substandard transformers.

Electricity Arrears of Rs 26 Billion to be Collected from Industrialists

The arrears of electricity tariff to be recovered by the authority from customers have increased by 7.77 percent compared to last year, reaching 52 billion and one crore rupees. The largest share (50.05 percent) of this is from 59 industries that have taken dedicated feeder and trunk line facilities. The Auditor General's Office has shown that the authority has outstanding premium charges of 26 billion and three crore rupees from these industries alone. According to the list included in the report, the defaulters include industries from the country's big business houses. The highest arrears are from Jagdamba Steel Pvt. Ltd. amounting to 1 billion 54 crore 46 lakh rupees. Similarly, Reliance Spinning Mills has arrears of 72 crore 61 lakh, Shivam Cement has 64 crore 41 lakh, Arghakhanchi Cement has 43 crore 24 lakh, Ghorahi Cement has 41 crore 3 lakh, and Triveni Spinning Mills has 30 crore 95 lakh rupees. The list includes dozens of industries including Hetauda Cement, Maruti Cement, and Udayapur Cement with arrears of crores of rupees.

Rs 7 Billion in Street Light Arrears, Kathmandu Metropolitan City Owes Rs 2 Billion

Similarly, the Auditor General's Office has shown that the arrears for street lights have reached 7 billion and 73 crore rupees. The Auditor General's Office has pointed out that Kathmandu Metropolitan City alone owes the authority 1 billion 99 crore rupees. The Auditor General's Office has shown the remaining 18 billion and 25 crore rupees as regular arrears to be collected from the general public and other customers. Despite repeated reminders from the Auditor General's Office, the Council of Ministers, and the Accounts Committee, industrialists have been defiant. Although the Auditor General's Office has shown arrears of 26 billion from 59 industries, the authority has currently initiated the process of recovering arrears only from January 2016 to April 2018 (approximately 7 billion from 36 industries). Even with the facility of 28 installments to pay this, industrialists are reluctant.

Rs 56 Billion Investment Without Approval and Violation of Law in Director Appointments

The Auditor General's Office has seriously raised the issue of the authority investing billions of rupees without the approval of the Government of Nepal.

According to Section 5 (a) of the Electricity Authority Act, 2041, government approval is required for share investment. However, the authority has invested 56 billion 8 crore 60 lakh rupees in shares in 35 entities (subsidiary, associate, and others) without approval. The report mentions that the authority's executive directors and other employees have represented as directors in more than one subsidiary company without government approval.

Error in Electricity Purchase Plan: Rs 1.22 Billion Expenditure on Imports

The report states that the authority has incurred a significant loss due to the mismatch between the authority's electricity purchase plan and actual production. Although agreements for 16,027 megawatts are in process with 253 independent power producers, production has been less than planned in most months. This has resulted in a deficit of approximately 268.8 million kilowatt-hours of electricity production for the authority. Due to the decrease in production, the authority has incurred an additional expenditure of an estimated 1 billion 227.9 million rupees due to the import of additional electricity from India during the dry season. The Auditor General's Office has suggested making commercial plans, stating the compulsion to import electricity in winter due to the wastage of electricity in the rainy season caused by run-of-river projects.

Rs 200 Million Wasted Due to Purchase of Substandard Transformers

In the fiscal year 2020/21, the authority had contracted for the purchase of 1,268 transformers at a cost of 200.8 million rupees. The report mentions that the authority's employees procured the transformers based on a brief inspection of the supplier's factory. However, after installation, these transformers, distributed without testing, were found to be of low quality (with high no-load and load loss). When the supplier refused to repair or replace them under warranty, the authority claimed through arbitration. The arbitrator decided that the supplier should pay the authority 967,289 US dollars and repair costs of 4.446 million rupees. However, the authority has not yet received this compensation amount. On one hand, the transformers purchased at a cost of over 200 million rupees have become unusable, and on the other hand, the authority has suffered double losses by not receiving compensation.