Finding inadequacies in rural electrification programme implementation, CAG today said delay in awarding projects resulted in at least Rs 696 crore cost escalation.

The Comptroller and Auditor General has also found that nearly Rs 158 crore fund meant for Rajiv Gandhi Grameen Vidyutikaran Yojana was diverted, while 29 projects worth Rs 548 crore were awarded to ineligible contractors.

The observations are part of the performance audit report on Rajiv Gandhi Grameen Vidyutikaran Yojana tabled in Parliament today.

Rural electrification is an ambitious programme launched in 2005. It is is being implemented by the Power Ministry and the audit report is for the period from 2004-05 to 2011-12.

According to the report, inadequacies in identification and estimation of un-electrified villages and BPL beneficiaries at the planning stage had the impact of variations in cost estimates to the extent of Rs 2,262 crore.

"In 425 out of 576 projects, the time taken to award the project was more than three months. The maximum delay was up to 46 months... The delay also led to cost escalation of projects. In test-checked cases in five states alone, the increase in cost amounted to Rs 696 crore," the report said.

As per the auditor, there were instances of diversion of funds to the tune of Rs 157.78 crore for "non-RGGVY purposes as RGGVY funds were mixed with general funds of the state power utilities".

Besides, CAG found cases of undue favour and violation of rules and procedures in award of contracts.

"In the test-checked cases, 29 projects amounting to Rs 548.61 crore were awarded to ineligible contractors in two states. Further, undue benefit of Rs 114.40 crore was extended to contractors on account of permitting higher rates, non deduction of taxes, etc which also resulted in avoidable increase project costs by that amount," the report said.

The two states are Jammu and Kashmir and Tamil Nadu.

Despite delay by contractors in completion of projects in time, the report said that in 14 states liquidated damages amounting to Rs 166.40 crore were not levied.

"Expenditure of Rs 41.42 crore was incurred for ineligible works, payments for works not done or assets not created and unfruitful expenditure on assets not put to use," the report noted.

CAG also noted that the Power Ministry did not conduct feasibility study before launching the scheme, despite recommendations from the 14th Lok Sabha's Standing Committee on Energy that updated statistic should be obtained on rural electrification.

Further, the auditor noted that REC did not link the terms of release of funds with achievement of physical targets set under approved RGGVY projects.

The report also found deficiencies in monitoring of the programme.