A joint audit report by the Royal Audit Authority (RAA) and the Comptroller and Auditor General of India (CAG) has estimated that the Bhutan would be losing Nu 15.97 bn in notional revenue loss for every year of the 1200 MW Punatsangchu I project being delayed.
With the project being delayed for an additional two years and five months from the original completion date of November 2016 to now the proposed April 2019, the total notional revenue loss comes to Nu 38.59 bn.
The report says that due to the improper decision in the relocation of the dam and some geological surprises the project completion date was rescheduled.
The actual loss could be much higher as the notional revenue loss has been worked out based on the tariff rate of Nu 2.91 per unit as worked out on the generation capacity of the 1200 MW project and cost of completion at Nu 82.64 bn.
Tariff is calculated based on the project cost and a higher the project cost would mean a higher tariff rate.
P-1 is estimated to generate 5,490 million units of power which if sold at Nu 2.91 per unit would generate Nu 15.97 bn a year in total revenue.
The report, however, points out that the above revenue loss would be much higher if the cost to completion (which is now 97.5 bn) and the revised tariff rate is taken into consideration.
The PHPA in its response said that overall delay in completion of the dam is mainly due to unforeseen geological reasons which at this point of time cannot be compared with the Detailed Project Report dam location and moreover similar fate cannot be ruled out for earlier site as good or bad as the present location. It says that the notional revenue loss of Nu 15.97 bn a year is in fact deferment of revenue as the project has a fixed working life.
The RAA in its counter reply has pointed out that while noting the geological surprises the management should bear in mind that for every period of extension of project completion period proportionate revenue is also lost. It says the ‘deferment of revenue’ argument by the PHPA would only hold good if the project had a fixed working life but that is not the case as through proper maintenance the economically useful life of the project may be prolonged. It says, moreover, deferment of revenue would also mean reduced time value for money spent.