Failure to settle tax rendered 128 solar power plants at police establishments non-functional: CAG

Jammu:  As many as 128 solar power plants at police establishments in Jammu and Kashmir remained non-functional since 2014 due to non-settlement of payment of works contract tax, the Comptroller and Auditor General (CAG) of India has said.

The CAG has asked the J&K Home Department to settle works contract tax (WCT) on priority and ensure rectification of defects in the non-functional plants, so that the investment made is utilised.

In its report on the social, general, economic and revenue for the year ended March 31, 2019 which was tabled in Parliament recently, the CAG said that “non-settlement of payment of WCT with the state taxes department rendered 128 solar power plants (SPPs) installed at police establishments non-functional since September 2014 despite incurring an expenditure of Rs 9.70 crore between May 2014 to January 2015 and availability of maintenance free warranty”.

To ensure uninterrupted power supply to police establishments, a proposal of Rs 37.94 crore to provide solar photovoltaic system for 523 locations was submitted by the Jammu and Kashmir Police on August 25, 2011, to the government for approval and onward submission to the Union Ministry of New and Renewal Energy, it said.

After only two days, a reworked proposal with a total financial implication of Rs 43.31 crore was submitted (27 August, 2011) including additional 25 locations (district police offices),” the report said.

“The government of India, under the Central Financial Assistance (CFA) sanctioned (February 2012) Rs 33.54 crore towards installation of 523 SPPs with an aggregate capacity of 1,408.6 KWP at the establishments of the J&K Police at a tentative cost of Rs 37.94 crore, it said.

Meanwhile, in line with a recommendation of state level purchase committee in March 2012, it was decided to float a notice inviting tender (NIT) in April of that year for the project.

The requirement of 523 locations was reworked to include 25 district police offices, four police stations and 10 police posts. The number rose to 562 and was duly projected in the NIT floated on April 25, 2012, the report said.

It said the lowest bidder quoted a price of Rs 36.14 crore, inclusive of taxes, for the project.

The contract for supply, installation, testing, commissioning and maintenance of SPPs of different capacities, aggregating up to 1553.76 KWP, for 562 locations was placed in March 2013 with the firm for Rs 36.14 crore on the grounds that the price quoted by it was well within the approved budget of Rs 37.94 crore, the report said.

As stated in the NIT, the J&K Service Tax and Value Added Tax (VAT) was not to be applicable to this contract and would be paid extra by the police department, if charged by the state taxes department.

The report said the delivery, installation and commissioning of SPPs was to be completed within six months from the date of placement of the supply order.

As per the terms and conditions of the supply order, the supplier was responsible for free warranty of five years for SPPs, 10 years for power output warranty for solar photovoltaic modules and replacement guarantee of 20 years for the modules,” it said.

Under the scheme, the renewable energy ministry was to provide CFA of Rs 243 per watt or 90 per cent of the sanctioned project cost whichever is less,” the report said.

The ministry, therefore, in June 2013 reduced the CFA to Rs 29.43 crore based on the tendered cost of the project, it said.

The first installment of 50 per cent of CFA or Rs 14.71 crore was released in June 2013 by the Centre to Jammu and Kashmir out of which an amount of Rs 14.39 crore towards payment of 187 out of 252 SPPs installed was made between May 2014 and January 2015, according to the report.

The CAG said post the installment of the 252 SPPs, 163 SPPs were found to be non-functional which included 128 SPPs for which payment of Rs 9.70 crore had been made.

The home department directed (August 2015) the supplier to rectify the defects in the installed 163 SPPs. The supplier informed the department in August 2015 that instead of repairing old power conditioning units of these SPPs, new power conditioning units were dispatched to J&K,” it said.

The material was, however, detained by the sales tax department on the grounds of non-deposit of WCT. The home department took up (February 2015 to May 2018) the matter with the government to either release Rs 3.80 crore on account of WCT at a rate of 10.50 per cent or for waiver of such tax, the report said.

The audit scrutiny in July 2017 of records of the director general of police, police feadquarters, Jammu, revealed that the matter relating to WCT, however, has not been resolved even after a lapse of more than five years, and 128 SPPs have remained non-functional for which payment of Rs 9.70 crore was made up to January 2015.

The DGP, police headquarters, Jammu, in its reply in June 2020 said the non-functional SPPs could not be repaired as spare parts were impounded by the commercial taxes department for non-payment of WCT.

The home department stated that all the issues shall be resolved as soon as the government releases WCT amount or waives it, the report said.

Thus, failure of the department to effectively coordinate and settle the issue regarding payment of WCT with the sales tax department led to impounding of spare parts dispatched by the firm which resulted in non-functional SPPs,” it stated.

As a result, the benefits of installation and commissioning of 128 SPPs could not be availed, despite an expenditure of Rs 9.70 crore having been incurred for installation of these 128 SPPs. The matter was reported to the government on May 2020, their reply is awaited (September 2020), the CAG said. PTI TAS

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