RCE Proposal
A Navratna PSU
SJVN LIMITED
(A joint venture of Govt. of India and Govt. of HP
A Navratna PSU)
Standard Operating Procedure
for Obtaining Approval of SJVN’s Board
on
Revised Cost Estimates (RCE)
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RCE Proposal
A Navratna PSU
Standard Operating Procedure (SOP) for obtaining approval of SJVN’s Board
of Directors on Revised Cost Estimate (RCE) as per extant powers to Navratna
CPSEs
1.0 Introduction:
1.1 SJVN Ltd. has been conferred with Navratna status vide Department of Public
Enterprises (DPE) letter dated 30.08.2024, forwarded through Ministry of Power
(MoP) letter dated 04.09.2024.
1.2 In pursuance to the power delegated to Navratna CPSEs vide DPE’s OM dated
22.07.1997 and enhanced delegation issued vide DPE’s OM dated 05.08.2005,
powers for approval of investment proposals rests with SJVN Board, in following
cases:
i) Approval of all projects implemented / to be implemented by SJVN on its own
without any monetary ceiling.
ii) Approval of project implemented / to be implemented by JV/Subsidiary
Company of SJVN and approval for equity investment in new JV/Subsidiary
Company by SJVN, entailing equity investment of 15% of net worth in one
project limited to Rs. 1000 crore and overall ceiling of 30% of net worth in all
such projects put together.
As Navratna status empowers the Board of CPSEs to accord approval of
projects being executed by parent company without any monetary ceiling, it is
inferred that Board of CPSE also has the power to approve the Revised Cost
Estimates (RCE) of the projects being executed by CPSE. Furthermore, MoP
vide its letters dated 19.11.2024 and 12.12.2024, has returned the RCEs
proposals pertaining to SJVN projects, stating that such proposals shall be
processed in accordance with the prevailing delegation of powers to Navratna
CPSEs, as outlined in the guidelines issued by the Department of Public
Enterprises. Similarly, for its Subsidiaries/JVs, SJVN Board of Directors (BOD)
has powers to approve the RCEs within the overall equity investment ceiling
prescribed by DPE.
1.3 Accordingly, towards streamlining the processes within SJVN for obtaining
approval on RCE proposals from SJVN Board, Standard Operating Procedures
(SOPs) approved by the SJVN Board of Directors shall be adopted for seeking
approval on RCE.
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RCE Proposal
A Navratna PSU
1.4 This SOP shall be applicable for all SJVN's projects and also for JV/Subsidiary
projects where RCE entails equity contribution by SJVN up to the extant limits.
1.5 Nodal departments may draw and adopt with approval of competent authority,
the sub-procedures for respective activity / roles & responsibilities, as defined
in this SOP.
1.6 Flow chart showing procedures & timeline shall be an integral part of this SOP.
2.0 Review of Cost Estimate:
2.1 In terms of mandatory review guidelines issued vide MoP’s OM dated
25.04.2014, Department of Expenditure's (DoE) OM dated 05.06.2018 and CEA
guidelines (Oct-19) on RCE, it is incumbent to have 'mandatory review' of cost
estimates at the stage when 50% of approved cost have been released and to
put up for appraisal/approval in case the cost is likely to exceed the Original
Cost Estimate (OCE) by more than 20%. The mandatory review does not
preclude a review at any earlier stage.
2.2 Further, as per CERC Tariff Regulations, tariff petition on COD of the project is
to be submitted within 90 days from date of commissioning along with details of
approved time and cost overrun.
2.3 Accordingly, the Project shall regularly review the Cost of Project of the project
during its implementation, with a view to determine whether Original Cost
Estimate requires upward revision by more than 20%?
2.4 RCE shall be processed for approval by Project/JV/SubsidiaryCompany at
following stages:
i) Whenever the upward revision from the Original Cost Estimate is observed
to be greater than 20%.
ii) Even if the 20% threshold isn’t crossed, a final RCE review must be done at
the Commissioning (COD) of the project. This review accounts for projected
remaining expenditures up to sunset date.
3.0 Prerequisites for initiation of RCE of HEPs & PSPs:
3.1 Approval of Memorandum of Changes (MoC):
3.1.1 CEAs guidelines (Mar-23) for approval of changes in design parameters
mandate approval of such changes in form of MOC, before their
implementation at site and also before initiation of RCE.
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RCE Proposal
A Navratna PSU
3.1.2 Design Department (Civil/Electrical/Hydro-Mechanical) (in case of
Hydroelectric Projects) and PSP Cell (in case of Pumped Storage
Projects) shall formulate MOC proposal on changes in Design
Parameters, in collaboration with Project/concerned departments, after
obtaining the approval from CMD and submit the same to Corporate
Planning Department.
3.1.3 Corporate Planning Department shall submit the MOC proposal to CEA
/ State Govt. and obtain necessary approval / NOC on the same, as per
extant guidelines.
3.1.4 In case of JV/Subsidiary Company project, such proposal shall be
prepared and submitted to CEA by the respective JV/Subsidiary
Company itself, after the approval by its Board. JV/Subsidiary Company
shall obtain necessary approval from CEA / State Govt.
3.1.5 Consultation of concerned departments of SJVN may be solicited based
on arrangement of the JV/Subsidiary Company with SJVN in this regard.
3.1.6 Formulation and submission of MOC proposal shall follow the extant
guidelines issued by CEA in this regard.
3.2 Approval of chapter on Time Overrun (TOR) of HEPs & PSPs:
3.2.1 In terms of CEA guidelines (2022 & 20.09.2023) on Time Overrun (TOR)
& formation of Standing Technical Committee (STC), approval of time
overrun is required prior to initiation of RCE proposal.
3.2.2 CERC Regulation-22 regarding controllable and uncontrollable factors
for delay in project in CERC Tariff Regulations is also to be referred.
3.2.3 Project shall prepare a chapter on time overrun including revised
construction schedule and submit the same to Corporate Monitoring &
Coordination Department (CM & C), duly recommended by Head of
Project (HoP), along with documentary evidences for each reason of
delays.
3.2.4 CM & C Department shall examine/finalize the complete chapter on time
overrun based on documentary evidences for reasons of delays and
obtain CMD approval after obtaining recommendation of Director
(Projects).
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RCE Proposal
A Navratna PSU
3.2.5 In case of JV / Subsidiary Company project, chapter on time overrun shall
be prepared/finalized by respective JV / Subsidiary Company itself and
approval of its Board of Directors shall be solicited. Consultation of
concerned departments of SJVN may be solicited based on arrangement
of the JV / Subsidiary Company with SJVN in this regard.
3.2.6 CM & C Department / JV / Subsidiary Company shall provide the
approved TOR and revised schedule to Project / concerned departments.
The same shall form the basis of initiation of RCE formulation.
3.2.7 Entire process from initiation of TOR chapter formulation up to the
approval of TOR & revised schedule shall be obtained within 45 days
(excluding the time taken by concerned Department / Project etc. to
provide requisite documents / inputs / comments etc., if any).
3.2.8 EDS (Extra Document Sought) / comments/queries etc. raised by project
/ any department during formulation/finalization of proposal shall be
promptly replied by the concerned Department / Project preferably within
a period of 5 working days and not more than 10 working days.
4.0 Initiation of RCE Proposal:
4.1 Initiation of RCE formulation by Project shall be reckoned as ‘Zero Date’ for the
purpose of this SOP w.r.t. for approval of RCE.
4.2 Formulation of RCE Proposal shall be done in line with CEA guidelines on RCE
(latest issued in Oct-19) and complying with all relevant guidelines/instructions
issued by CEA/MOP/DoE/MNRE etc. from time to time. CERC Regulation-21
regarding IDC & IEDC are also to be referred.
4.3 The Project shall finalize & submit RCE to respective HoP (for HEPs & PSPs of
SJVN) / CEO/MD of Subsidiary/ JV Company (for JV / Subsidiary projects), duly
vetted by Project Finance.
In case of JV / Subsidiary project, consultation of concerned departments of
SJVN may be solicited based on arrangement of the JV / Subsidiary Company
with SJVN in this regard.
4.4 RCE proposal shall contain approved/anticipated/actual COD, sunset date,
contingent liabilities (not to be included in RCE), detailed reasons for overruns
with documentary evidences etc.
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RCE Proposal
A Navratna PSU
4.5 RCE finalization & submission shall be completed by Project within 60 days
from the Zero Date (excluding the time taken by concerned department etc. to
provide requisite documents etc., if any).
4.6 EDS (Extra Document Sought) / comments/queries etc. raised by
project/department during formulation/finalization of proposal shall be promptly
replied by the concerned departments / Project / JV / Subsidiary Company etc.
preferably within a period of 5 working days and not more than 10 working days.
5.0 Examination and vetting of RCE:
5.1 Cost Engineering Department/Cell (CED) shall examine the RCE proposal and
seek clarification / additional inputs from Project and other associated
departments towards completeness of the RCE proposal in terms of extant
guidelines of GoI, after receiving the complete RCE proposal from respective
HoP / Department.
5.2 Respective HoP / Department shall recommend the complete proposal of RCE
after examination and forward the case file to CED, Corporate Office for
examination duly vetted by respective Project Finance wing.
5.3 CED shall submit duly examined and vetted RCE proposal to Corporate
Planning Department along with all requisite formats in terms of CEA guidelines
on RCE.
5.4 In case of JV / Subsidiary Company Project, RCE proposal shall be submitted
to Cost Engineering Department/Cell, Corporate Office for examination and
vetting of RCE proposal before obtaining approval of Board of respective JV /
Subsidiary Company.
Further, respective JV / Subsidiary Company shall submit the agenda along with
approval to RCE proposal by its BOD to Corporate Planning Department for
obtaining recommendation of Committee of Directors (COD) and approval of
SJVN Board, where RCE entails equity contribution up to the extant limits*.
However, Approval of RCE proposal entails equity contribution greater than
extant limits shall be dealt by respective JV / Subsidiary Company as per 6.1.6
of SOP.
5.5 Corporate Planning Department shall obtain comments/inputs by concerned
departments and finalize the RCE proposal. Corporate Planning Department
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RCE Proposal
A Navratna PSU
shall send the finalized RCE proposal for examination/inputs by Corporate
Finance Department.
5.6 Comments/observations of Corporate Finance Department shall be replied
through Corporate Planning Department with inputs from concerned Project /
Department / JV / Subsidiary Company etc. Corporate Finance Department
shall submit duly examined and vetted RCE proposal to Corporate Planning
Department for further processing.
5.7 After receiving the proposal by respective HoP / JV / Subsidiary Company, this
stage up to recommendation of RCE proposal by Corporate Finance
Department shall be completed within 75 days (excluding the time taken by
concerned departments / Project / JV / Subsidiary Company etc. to provide
requisite documents/inputs/comments etc., if any).
5.8 EDS (Extra Document Sought) / comments/queries etc. raised by any
department during finalization/examination of document or proposal shall be
promptly replied by the concerned departments / Project / JV / Subsidiary
Company etc. preferably within a period of 5 working days and not more than
10 working days.
6.0 Appraisal and Approval of RCE:
6.1 Corporate Planning Department shall process the RCE proposal for Appraisal
and Approval of competent authority, as below:
6.1.1 Any increase in cost due to Statutory Levies (SLV), Exchange Rate
Variation (ERV) & Price Escalation (PE) within the approved time cycle
and/or increase in cost up to 20% due to any other reason are covered
under the approval of the OCE. Such RCE proposal shall be approved
by CMD with financial concurrence of Director (Finance) after
recommendation of the RCE proposal by Director (Projects).
6.1.2 Any increase in cost beyond 20% of firmed up cost estimates due to time
overrun, change in scope, under-estimation, etc. (excluding increase in
costs due to SLV, ERV & PE within approved time cycle), Corporate
Planning Department shall prepare and submit a Background / Agenda
Note before Committee of HoDs [comprising of HoDs of Corporate
Planning, Design Department (Civil/Electrical/Hydro-Mechanical), PSP
Cell, CM & C Department, Corporate Finance Department, CED,
Commercial & System Operation (C&SO), Corporate Geology as
applicable and approved by CMD] for examination.
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RCE Proposal
A Navratna PSU
6.1.3 Committee of HoDs shall examine the specific reasons behind
deviations, identify lapses and suggest remedial measures (if any) for the
same and submit a report thereon. Committee of HoDs report shall form
the part of RCE proposal.
6.1.4 After submission of the report by Committee of HoDs, RCE proposal of
SJVN’s own projects shall be approved by Board of SJVN after the
appraisal by a Committee of Directors; comprising of Director
(Personnel), Director (Finance) and Director (Projects).
6.1.5 In case of JV/Subsidiary Company, for any deviation in project cost where
RCE entails equity contribution up to extant limit*, duly approved RCE
proposal by Board of respective JV/Subsidiary Company shall be
approved by Board of SJVN, after the recommendation of Committee of
Directors; comprising of Director (Personnel), Director (Finance) and
Director (Projects). Approval of joint partner(s) on the RCE proposal and
equity contribution equivalent to their share in total RCE (in terms of
Promoters Agreement) shall also be provided to Corporate Planning
Department by the JV / Subsidiary Company, prior to posing the complete
RCE proposal for approval of SJVN's BOD.
6.1.6 Approval for RCE proposal of Projects, where RCE entails equity
contribution greater than extant limits* shall be obtained as per extant
DoE guidelines dated 05.08.2016.
* Extant limit of equity contribution is up to 15% of SJVN's net worth in one
project limited to Rs. 1000 crore and overall ceiling of 30% of SJVN's net worth.
6.2 For COD / BOD of SJVN level deliberations/approval, HOD (Corporate
Planning) shall present the investment proposal, in association with HoP /
MD/CEO of JV/Subsidiary Company, CM & C Department, CED, C & SO
Department, PSP Cell, Design Department (Civil/Electrical/Hydro-Mechanical),
Corporate Geology, Corporate Contracts Department, Corporate Finance
Department etc., as per the requirement.
6.3 Approval on RCE proposal may be obtained within 60 days from the date of
receiving in Corporate Planning Department the duly recommended RCE
proposal by Finance Department (excluding the time taken by concerned
departments / Project / JV / Subsidiary Company etc. to provide requisite
documents/inputs / comments etc., if any).
6.4 EDS (Extra Document Sought) / comments/queries etc. raised by any
department/Committee during finalization/approval of proposal shall be
promptly replied by the concerned departments / Project / JV / Subsidiary
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RCE Proposal
A Navratna PSU
Company etc. preferably within a period of 5 working days and not more than
10 working days.
6.5 The approval on RCE proposal, as approved by the Board, shall be
communicated to Project / concerned departments / JV / Subsidiary Company
etc. by Corporate Planning Department for initiating necessary actions
accordingly.
6.6 Approval of time extension in Lot wise contracts shall be dealt by the Project /
JV / Subsidiary Company with relevant DOP clauses. Similarly, approval of
deviation in component wise cost, as approved by competent authority, shall be
dealt with relevant DOP clauses.
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