CHAPTER 16
MINISTRY OF NON CONVENTIONAL ENERGY SOURCES
Indian Renewable Energy Development Agency Limited
16.1.1 Avoidable payment of commitment charges due to
tie up of loans in excess of requirement
Entering into loan agreement based on unrealistic projections
resulted in avoidable payment of Rs.7.90 crore till March 2002 and recurring
annual expenditure of Rs.1.89 crore.
Indian Renewable Energy Development Agency Limited (Company)
promotes, develops and finances new renewable sources of energy projects. To
meet its financial requirements, the Company tied up financial arrangements with
Asian Development Bank (ADB) for US$ 100 million (equivalent to Rs.484 crore)
and Kreditanstalt Fur Wideraufbau (KFW) for DM 120 million (equivalent to Rs.261
crore). Accordingly, the Company signed agreements with ADB on 23 April 1997 and
with KFW on 5 June 1997. According to the terms and conditions of the agreement,
the Company was to draw the full amount of loan within 4 years from ADB and
failure to do so would attract commitment charge of 0.75 per cent per annum on
unavailed portion of the loan 60 days after the committed dates. Similar
provision existed in the agreement with KFW with commitment charges at 0.25 per
cent.
Against the above arrangement for Rs.745 crore, the Company
could avail credit facility for Rs.408 crore only (ADB-US$ 56.91 million
equivalent to Rs.274 crore approximately and KFW-DM 61.65 million equivalent to
Rs.134 crore) till the expiry of 5 year from the date of the agreements.
Consequently, it had to pay commitment charges of Rs. 7.90 crore (ADB: Rs.6.52
crore and KFW: Rs.1.38 crore) till March 2002.
The Consultant appointed by the Company to study the
viability of the loans recommended (June 2000) that these loans were
economically unviable and the agreements be foreclosed. However, these
agreements had not been foreclosed till date (August 2002) and the Company was
still incurring commitment charges of Rs. 1.89 crore (approximately) annually.
Management, in their reply, admitted (July 2002) that
commitment charges were paid as per contractual arrangements as it could not
draw the funds from ADB/KFW due to dropping/delaying of projects by the
borrowers and slow down of the economy. These factors were beyond the control of
the Company.
Ministry endorsed (September 2002) the views of Management.
The reply of Management/Ministry is not convincing because the essential facts
in the economy could not be ignored in any appraisal of loan utilisation.
Further, the Company have not paid heed to their consultant’s views also. The
fact, thus, remains that the Company had so far (September 2002) incurred an
expenditure of Rs.7.90 crore by way of commitment charges on unutilised loan.
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