Auditor finds deficiencies in Kudankulam 1 and 2 project

A number of "deficiencies" in the project to construct and commission units 1 and 2 of the Kudankulam nuclear power plant have been identified by the Comptroller and Auditor General of India. A performance audit was conducted to assess whether Nuclear Power Corporation of India Limited exercised prudent financial management and implemented the project in an efficient manner.

A number of "deficiencies" in the project to construct and commission units 1 and 2 of the Kudankulam nuclear power plant have been identified by the Comptroller and Auditor General of India (CAG). A performance audit was conducted to assess whether Nuclear Power Corporation of India Limited (NPCIL) exercised prudent financial management and implemented the project in an efficient manner.

Kudankulam units 1 and 2 (Image: CAG)

Kudankulam, in Tamil Nadu, is home to two VVER-1000s. Unit 1 entered commercial operation in December 2014, while unit 2 reached 100% of its operating capacity in January this year. NPCIL signed an agreement on 3 April provisionally accepting Kudankulam 2 from its Russian suppliers and thus marking the unit's entry into commercial operation. The unit reached first criticality in May 2016 and was connected to India's power grid in August the same year.

Mandated by the constitution of India, CAG promotes accountability, transparency and good governance through high quality auditing and accounting and provides independent assurance to its stakeholders, the legislature, the executive and the public, that public funds are being used efficiently and for the intended purposes.

CAG said its audit had identified deficiencies in the project to construct Kudankulam 1 and 2. These include: the avoidable payment of interest on borrowings; non-transparency in availing loans; lapses in the tariff fixation process; extending undue benefits to the overseas collaborating partner; non-assessment of required manpower with consequent avoidable expenditure; inadequate monitoring; and start of commercial operation before receiving the required licence to operate from the competent authority. "These, as a result, ended up in significant escalation in the cost of the project and substantial delays in commissioning of the units," CAG said in its report released on 27 December.

The initial estimated cost of the two units was INR13,171 crore ($3 billion) in 2001, which gradually rose to INR22,462 crore in 2014, CAG noted. There were major delays in the start of commercial operations of Kudankulam 1 and 2 by 86 and 101 months, respectively. The report says these delays were due to the late completion of different activities, "of which many were attributable to Atomstroyexport". However, there was no revision of the schedule of repayment of the Russian credit, which resulted in the start of repayment before revenue generation, causing an additional interest burden to NPCIL. This in turn led to NPCIL resorting to external borrowings at a higher interest rate.

CAG also noted NPCIL made miscalculations in fixing the tariff for power from the two units, including in the pre-commercialisation period. It also said NPCIL lost substantial revenue due to an extended refuelling outage at unit 1. The outage had been expected to last 60 days but took 222 days to complete as the company wanted to perform the work by itself.

NPCIL declared unit 1 to be in commercial operation on 31 December 2014, which CAG noted was six months before it received the licence from the regulator, the Atomic Energy Regulatory Board, for regular operation of the unit.

CAG made a number of recommendations to NPCIL to avoid repeating the mistakes it made, thereby keeping future such projects to cost and on schedule.

Two further VVER-1000 units - Kudankulam 3 and 4 - are to be built at the site in a second construction phase. The first pouring of structural concrete for these units was marked on 29 June. This is the formal start of construction of a nuclear unit, although site preparation works have been underway at the Kudankulam site for several years.

In June, Russia and India signed a framework agreement enabling construction of the so-called third stage of the plant, covering the construction of Kudankulam units 5 and 6.

Researched and written
by World Nuclear News