Pune-based Prayas Energy Group sees an improvement in power capacity addition since the introduction of competitive bidding, but it says that the process must be above board
Competitive bidding for power projects has significantly improved the tempo of capacity addition in the country, but the bidding process must be transparent, with necessary regulatory oversight and scrutiny, and developers must adhere to contractual obligations if the gains are to be sustained, according to Prayas Energy Group.
In a report titled 'Transition from MoU to Competitive Bidding: Good take-off but turbulence ahead', published last week, Prayas has analysed issues arising from the shift in policy for new power projects and how this has progressed over the past five years. Prayas is a non-government organisation based in Pune set up by professionals working to protect and promote public interest in health, energy and education fields through various initiatives.
The report points out that the guidelines for competitive bidding, issued in 2005, are not being followed consistently and that critical provisions on transparency and accountability are being compromised. In this respect, it says, it is necessary that changes are not made to benefit a particular developer and that such practices can be curbed through periodic reporting on the ongoing bidding exercise to the appropriate regulator and undertaking public hearings before initiating any changes in the projects.
Prayas has focused on coal-based thermal capacity contracted on a long-term basis through the bidding process. The Electricity Act 2003 enabled competitive bidding that encouraged private sector investment in power generation. The guidelines were notified by the power ministry in 2005.
The Act allows industries to set up captive power plants and also gives consumers a choice to select the power generator through an 'open access' mechanism. Over the past five years, state electricity distribution companies have contracted over 42,600 MW capacity through the competitive bidding route, Prayas reports.
On the issue of transparency, Prayas says many states do not make public on websites the information of the bidding for engineering, procurement and construction (EPC) contracts which has led to questions on the integrity of the process. It has recommended that it be made mandatory to upload the bid documents, the bid evaluation spreadsheet and evaluation report, certificates, correspondence and all other agreements with the successful bidder, for the benefit of the common people .
In this respect, Prayas has proposed the setting up of a central information repository that will compile all such important information and documentation for each bidding process in each state. It says that necessary amendments should be made to the bidding guidelines to allow citizens easy and timely access to this information. Similarly, an modifications to be made in the bid evaluation spreadsheet in a particular case should be done only under the approval and supervision of the regulatory commission.
The NGO has also described certain problems that continue to hamper work for developers, like the acquisition of land, securing environment clearance and uncertainty over fuel supply that may result in non-compliance with the power purchase agreement (PPA). It says that in these situations, provisions may be considered for multi-stage bid bonds, and to ensure procurer's rights over the generation plant in case of default by a developer.
Prayas thinks that the tariff discovery through the bidding process has been quite competitive vis-à-vis projects coming up on a cost-plus basis. For example, the capacity charge of competitively bid Case-1 projects is equivalent to the capital cost of about Rs3.5 crore to Rs4.5 crore per MW, whereas many cost-plus projects have a capital cost between Rs4.5 crore and Rs5.8 crore per MW.
The report highlighted the failure of the Independent Power Producers (IPPs) policy in the 1990s, under which IIPs were allowed to set up power plants by signing memorandums of understanding (MoUs) with respective state governments. But, Prayas says, due to the lack of transparency, the power sector saw small capacity additions during the 1990s. The controversial Dabhol Power Corporation set up by Enron in Maharashtra is a classic example of a governance crisis during the IPP era. The IPP process not only resulted in high project cost, but it also failed to bridge the growing demand-supply gap.
Vaibhav Dahake, 44, pleaded guilty before a US district judge to an indictment charging him with one count of conspiracy to defraud the Internal Revenue Service and concealing undeclared bank accounts in India. He faces a maximum sentence of five years in prison and a $250,000 fine, or twice the amount of financial gain accrued to him or loss to the IRS
Washington/Boston: An Indian-American businessman today pleaded guilty of conspiring to defraud US tax authorities by hiding his bank accounts in HSBC India, a case which has led US Internal Revenue Service to probe Non-Resident Indians (NRIs) holding accounts in the bank, reports PTI.
Vaibhav Dahake, 44 of Somerset, New Jersey pleaded guilty before US district judge Freda Wolfson to an indictment charging him with one count of conspiracy to defraud the Internal Revenue Service (IRS) and concealing undeclared bank accounts in India, a statement by the US Attorney's Office, District of New Jersey said.
Mr Dahake, who was indicted in January this year, is scheduled to be sentenced on 22 July 2011.
He faces a maximum sentence of five years in prison and a $250,000 fine, or twice the amount of financial gain accrued to him or loss to the IRS.
Additionally, Mr Dahake has agreed to pay a 50% civil penalty for failing to file reports of foreign bank or financial accounts relating to his undeclared bank accounts for the calendar years 2004-2009, during which the accounts had the highest balance.
"New Jersey businessman Vaibhav Dahake admitted today that he conspired to hide his assets from the IRS by stashing them in India. As all taxpayers prepare to file their annual returns, we remind them and their financial institutions not to cheat their fellow citizens by defrauding the IRS," US attorney Paul Fishman said.
The guilty plea comes just four days after the US Department of Justice sought a federal court order requiring HSBC Bank to provide information about US residents, particularly non-resident Indians, who may be using HSBC India accounts to evade income taxes.
In its petition to a San Francisco court, the Justice Department had cited Dahake's case, saying he conspired to defraud the US by using undeclared accounts in the British Virgin Islands and at HSBC India.
The US government asked the court to allow the IRS to serve a 'John Doe' summons on HSBC under which the bank would have to produce records identifying US taxpayers with accounts at HSBC India, many of whom are believed by the government to have hidden their accounts from the IRS.
"Those who still think they can hide their assets and income offshore to evade taxes need to rethink their strategy.
The Department of Justice is committed to prosecuting such individuals," principal deputy assistant attorney general of the Justice Department's Tax Division John DiCicco said.
According to documents filed, Mr Dahake was helped by five HSBC employees in concealing his accounts in India in order to avoid paying taxes in the US.
Mr Dahake admitted that from 2001 through 2010, he maintained undeclared bank accounts in India that he failed to report on his federal income tax returns.
The accounts were maintained at a "large international bank" which was headquartered in England and maintained offices throughout the world, including in India, Singapore, Hong Kong and the US.
Mr Dahake received an unsolicited letter from the bank in 2001 advertising bank accounts in India that paid high interest rates.
He subsequently met with a banker, employed by the bank's New York office, who advised Mr Dahake that one of the advantages of opening up a bank account in India was that he would not have to supply the bank with his social security number.
After Mr Dahake opened an account in India, the banker advised him not to send one large cheque but to send five cheques each in the amount of $10,000, in order to "stay below the radar."
During 2003 and 2004, Mr Dahake wire transferred additional funds from the British Virgin Islands to his undeclared bank account in India.
In connection with these wire transfers, a second banker employed by the international bank in New York advised Mr Dahake that he could conceal his undeclared accounts by converting funds from US dollars into either British pounds or euros before wire transferring them.
The banker told Mr Dahake that the funds would not be transferred through the US banking system because the international bank had correspondent banks in Europe and around the world that handled transactions in different currencies.
During a subsequent trip to India, Mr Dahake spoke with a third banker, employed by the international bank in California, regarding how to conceal the repatriation of funds from India to the US.
The banker advised Mr Dahake that he and his wife should not withdraw more than $18,000 collectively to avoid coming back into the US with over $10,000 each, the court documents said.
In 2006, Mr Dahake faxed a letter to the international bank in India instructing the bank to issue him five bank cheques, each in the amount of $9,500, and to send the cheques via courier to his residence in New Jersey as advised by a banker.
Following publication of news reports that Swiss bank UBS AG had entered into a prosecution agreement with the US Department of Justice, Mr Dahake advised the banker in California that he was considering repatriating all his money from India to the United States.
In response, the banker told Mr Dahake he had nothing to worry about because the IRS would be looking for undeclared accounts maintained in the Caribbean rather than in the Far East.
The banker also advised Mr Dahake that the international bank operated banks in both Singapore and Hong Kong and that the banker could introduce Mr Dahake to bankers in those countries if he wanted to move his funds there.
IRS Criminal Investigation chief Victor Song said authorities will continue to crack down on offshore tax evasion and pursue hidden offshore assets "no matter where they are located."