Parliamentary Panel Blames MNRE of Poor Financial Planning in Vital Sector

The parliamentary panel has stated that the low utilisation of even decreased allocated amounts is symptomatic of poor financial planning by MNRE

The Standing Committee on Energy recently presented its ‘Demand for Grants 2021-22’ report for the Ministry of New and Renewable Energy (MNRE) in the parliament. Based on its findings and observations, the parliamentary panel was of the opinion that that variation in budgetary allocations at the stage of revised estimates and low utilisation of even the decreased allocated amounts under various heads are symptomatic of poor financial planning by the Ministry.

In its findings, the committee did observe that the Gross Budgetary Support to the Ministry was substantially decreased at the time of revised estimates. The allocation was reduced by about 26 percent during the year 2019-20 and about 38 percent for 2020-21.

However, to its disbelief, it also found that the Ministry had not been able to fully utilise even the decreased allocations during the previous years. It could utilise 86.97 percent, 91.53 percent and 69.78 percent of revised budgetary allocations during the years 2018-19, 2019-20 and 2020-21 (upto January 2021) respectively.

It stated that “The Committee finds it very strange that funds are un-spent in such an important and dynamic sector with a huge target of 175 GW to be achieved by the year 2022. Non-utilisation of budgeted funds is unacceptable in a Country where budgetary resources are limited and so many dream projects are to be completed with prudent financial planning and therefore it is of utmost importance that the budgetary allocations are fully and properly utilised.”

It further stated that the Budgetary allocations approved by the Parliament for a particular financial year cannot be left to remain only on paper as these are scarce lapsable funds which are meant to be properly spent and fully utilised within the prescribed budgetary time-frame well before the close of the particular financial year.

Thus, the committee is of the opinion that variation in budgetary allocations at the stage of revised estimates and low utilization of even the decreased allocated amounts under various Heads are symptomatic of poor financial planning by MNRE.

It has thus recommended that the Ministry should streamline its budget formulation process and increase its fund absorption capacity, as continuous shortfall in utilisation of the allocated funds will have an adverse impact on the demand of budgetary allocations of the Ministry for subsequent financial years.

Additionally, the panel also observed that the Ministry has not been able to fulfil its obligation regarding utilisation of 10 percent of its annual budget for the development of renewable energy in the North-Eastern Region. 

The panel highlighted that the Ministry has time and again submitted that adequate proposals have not been received from the North-East States, due to which there is a substantial shortfall in fund utilisation. It is also submitted that the potential for solar and wind energy in North-Eastern Region is much less in comparison to other states, thus making solar and wind power produced in these areas non-remunerative. 

However, the panel stated that beyond wind and solar “we are aware that the north-eastern region has substantial potential for small hydropower; however, its capacity addition since 2017-18 has been zero except for minimal addition in 2018-19.”

Keeping in view the fact that the northeastern states are more interested in off-grid and decentralised schemes of the Ministry, the Committee recommends that the Ministry should give priority to the North-Eastern States in implementation of the off-grid and decentralised application programme of the Ministry and specificities of this region should be kept in mind while formulating the schemes.

The Ministry in its defence stated that 

• The expenditure during 2018-19 was 86.97 percent. These shortfalls were due to not receiving adequate proposals from any of North Eastern states under various schemes. Research and development projects are continuous efforts in nature with a duration of generally three to four years. Funds are released after completion of various milestones achieved and proper evaluation of the ongoing projects. As a result, there was a shortfall in the actual expenditure as some of the milestones/evaluations could not be completed in time.
• The expenditure during 2019-20 was 91.53 percent of the revised estimate. These shortfalls were due to not receiving adequate proposals from any of North Eastern states under various schemes. 
• During 2020-21, as on January 31, 2021, an expenditure of Rs 2505.79 crore has been made against a revised estimate of Rs 3591 crore which is 69.78 percent of RE. The Ministry is making all-out efforts to utilise 100 percent RE. However, there may be some shortfall due to delays in the implementation of projects due to COVID-19 pandemic and lack of adequate proposals from the North East.

Elsewhere, the committee has observed that the Indian Renewable Energy Development Agency Limited (IREDA), under the administrative control of MNRE, is the only non-banking financial institution exclusively engaged in promoting, developing and extending financial assistance for setting up projects relating to renewable sources of energy.

It found that IREDA has an outstanding foreign currency loan of Rs 8,857.20 crore guaranteed by the Government of India, for which it has also paid the guarantee fee of more than Rs 96 crore in 2019-20 and Rs 118 crore in 2020-21. Further, it has also been submitted that IREDA has Non-performing Assets (NPAs) of Rs 69.2237 crore in the Biomass Sector and Rs 628.4256 crore in the Small Hydro Sector. 

The panel has proposed that

1. The Ministry should explore the possibility of exempting IREDA from payment of Guarantee fee which have been levied by the Government in lieu of extending sovereign guarantee which will help bolster its balance sheet; 
2. IREDA should gear up its machinery towards reducing its NPAs in accordance with the norms of the RBI.