PNGRB fines H-Energy for delays in pipeline construction

New Delhi: Oil sector regulator PNGRB has fined H-Energy Private Ltd, a part of real estate giant Hiranandani group, for delays in laying a pipeline from Jaigarh in Maharasthra to Mangalore in Karnataka, via Goa, to carry natural gas to users.

HEPL was granted a licence to lay the 635-kilometre Jaigarh-Mangalore natural gas pipeline (JMPL) on June 28, 2016. The line with a capacity to carry 17 million standard cubic meters per day of gas was supposed to be commissioned by June 27, 2019, the Petroleum and Natural Gas Regulatory Board (PNGRB) said in an order dated June 7. Jaigarh is the port where HEPL is setting up a floating terminal to import LNG.

"The Board while examining the progress of the JMPL project, observed that as on March 2022, the progress is nil," it said. "PNGRB granted an extension to HEPL for completion of the project until March 31, 2021, subject to completion of a few activities by September 30, 2020. Further, the remedial time period till September 30, 2020, was extended till March 31, 2021. The entity has (however) not achieved the timelines for any of these activities."

PNGRB ordered encashing "25 per cent of the performance bank guarantee (submitted by HEPL at the time of winning the authorisation of the pipeline) amounting to Rs 5 crore."

It asked the company to refurbish the encashed guarantee amount within 1 week, failing which further action will follow.

Even after five years from the date of grant of authorization, "there has not been any satisfactory progress in the JMPL project," the order said. "On the contrary, the entity requested an extension of 5 years which in itself is 2 years more than the maximum time period of 36 months normally allowed by PNGRB for the execution of any pipeline."

The project, it said, is on standstill since March 2020.

"It is pertinent to mention that the reasons as stated by HEPL for the delay in implementing the project are inherent project risks and these may not be considered as Force Majeure conditions," the order said.

"The Board has provided ample opportunities to achieve the physical targets as stipulated, but the entity failed to do so. The Board after completion of 5 years of authorization, found out that as on March 2022, the progress of the pipeline is nil."

In the detailed order, PNGRB said HEPL had admitted to not starting work on the laying of the pipeline at a progress review meeting held on April 12, 2018.

"The Board consistently reviewed and monitored the progress of the project through quarterly reports and status of the subject pipeline submitted by the entity. However, the Board did not see any progress in the project," the order said.

In 2019, HEPL submitted to PNGRB that while there is no visible physical progress, the pipeline project will be completed by May 2023.

While the Board conveyed its "concern and dissatisfaction on account of lack of progress", HEPL was asked to submit timelines for physical activities in the next six months but the firm did not detail the length of the pipeline that would be laid in the given timeframe.

The order said subsequent follow-ups didn't yield any tangible results and HEPL in September 2020 sought force majeure for two years beginning March 20, 2020, due to the pandemic and projected completion of the pipeline by May 2025.

"The Board after examining the revised schedule of the project observed that the time extension for JMPL sought by HEPL on account of COVID-19 coupled with other issues does not seem to be justified when any major project activity had not been achieved as on date," it said.

The regulator, however, taking into account the outbreak of COVID-19, agreed to a time extension beyond March 31, 2021 subject to the satisfactory completion of remedial actions and progress of the pipeline.

HEPL on June 20, 2021, submitted that it could not undertake any of the agreed activities, due to the pandemic and sought a revision in the completion schedule.

At the review meeting on August 6, 2021, HEPL submitted that the project execution got hampered due to COVID-19 conditions for the last two years.

"Prior to COVID-19, the principal concern was the route of JMPL, which is along National Highway in all three states i.e., Maharashtra, Goa and Karnataka. Further, due to time delay, there has been cost escalation of the project to the tune of Rs 6,000 crore vis- -vis original estimated cost of Rs 2,389 crore," the order quoted HEPL's submission.

HEPL proposed a viability gap funding along with a 60 months for implementation of the project; laying pipeline in parts or surrendering of the licence.

PNGRB said viability gap funding was not an option available with it and the option of laying the pipeline in parts could not be accepted as it was based on certain conditions.

On May 17, 2022, HEPL sought to surrender the licence "on account of frustration and impracticality of JMPL" and no penalty be imposed.

PNGRB said there is no provision for surrender of the authorisation of a pipeline. "Further, when the project should have been completed after 5 years of authorisation, the entity requested for the surrender of Authorisation when it fails to justify the delay at its end to complete the JMPL project prior to COVID-19 outbreak."

It rejected the request for surrender and imposed the penalty.

In its submissions, HEPL contended that it had conducted and completed all requisite preliminary activities at its end including DFR, reconnaissance survey, demand assessment and detailed route survey but faced impediments in the National Highway Authority of India (NHAI) not providing the necessary details of Right of Way (RoW) for the entire length of the pipeline.

Also, the progress of work was disrupted due to COVID-19 and the cost had further risen to Rs 7,865 crore from original estimate of Rs 2,389 crore.

(With PTI inputs)

(PSU Watch– India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Google News. Click here to follow. Also, join PSU Watch Channel in your Telegram. You may also follow us on Twitter here and stay updated.)