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DAM-L LS: WHAT'S SO PRIVATE ABOUT THE MAHESHWAR HYDRO PROJECT? (fwd)
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Date: Fri, 29 Jun 2001 09:06:36 -0700 (PDT)
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Subject: LS: WHAT'S SO PRIVATE ABOUT THE MAHESHWAR HYDRO PROJECT?
Asian Age
WEDNESDAY 27 JUNE 2001
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WHAT'S SO PRIVATE ABOUT THE MAHESHWAR HYDRO PROJECT?
The story of the opposition to the 400 MW Maheshwar hydroelectric project
in Madhya Pradesh is that of stopping the transfer of Rs 1,577 crores from
India's public financial institutions and banks to S. Kumars, the promote
rs of the Rs 2,500 crores project, on the grounds that the project is
overcapitalised and therefore the power will be very expensive. According
to S. Kumars, the project has a 70:30 debt equity structure with the
financial institutions share being Rs 1,577 crores. S. Kumars and
associates will contribute 51 per cent of the equity, which is Rs 270
crores, and the rest will come from the public and through private
placements. S. Kumars' Mukul Kasliwal says that since he is now resorting
to Indian financing totally, since all his former foreign partners and
financiers are out of the project, the project cost will come down a
little, but it still makes it an expensive project at around Rs 6 crores
per MW. Just two years ago, MSEB put up the second phase of Koyna for
around Rs 2 crores per MW and even if you add interest rate of say 30 per
cent, the cost would go up a fraction more 97 but nowhere near the Rs 6
crores per M W of the Maheshwar project. The irony is that the private
sector was brought into the power sector because there was paucity of
funds with the government. And now a whopping Rs 1,577 crores is going
from public funds.
FIs cornered:
Perhaps S. Kumars cannot be faulted for dipping its fingers into the
public funds because it is only taking advantage of the government's
rules. As Mr Kasliwal said, `the resolution No. 237 passed on October 22,
1991, was modified on October 13, 1998, by the Government of India,
removing the 40 per cent ceiling on the investment by Indian financial
institutions.' The point of the antagonists of this project is that the
financial institutions like IFCI, the lead lender, and the IDBI, banks
like SBI and Dena Bank and the Power Finance Corporation have not shown
sincere due diligence of the project. The Kasliwals have maintained that
they will be able to offer a levelised tariff of only Rs 2.38 per kwh in
present value terms. They claim they are the lowest of all projects being
set up in Madhya Pradesh. Dabhol too made the same claims, which have now
been totally exposed. One has yet to see how S. Kumars have worked out
their tariff.
NBA Challenge:
Interestingly, the Narmada Bachao Andolan has challenged S. Kumars to
defend its claims of Rs 2.38 per unit by a public review of the tariff
sheets of the project. The NBA is prepared to share its own calculations!
One hopes that the Kasliwals take up this challenge. The NBA points out
that on the basis of the operative tariff formula from the project power
purchase agreement, at the proposed outlay of Rs 2,254 crores and the
financial package currently submitted to the CEA the levelised tariff of
Maheshwar project for the next 35 years at bus bar is around Rs 6.5 per
KWH. The cost of peaking power will be around Rs 9-10 per KWH. According
to NBA, even the IDBI officials who met them recently after their
demonstration admitted that the cost of Maheshwar project would be Rs 4.21
per KWH as per their computation. The deficit of the Madhya Pradesh
Electricity Board is around Rs 165 crores per month. The recent Shivraman
Committee report says MPEB has no escrowable capacity at all. MPEB, which
had taken Rs 350 crores from the IPPS who have now withdrawn, can no
longer return these because it has in the meantime taken a loan against
these deposits!
What will MPEB have to pay?
S. Kumars is silent on the money that will flow to them from the Madhya
Pradesh Electricity Board every month and says only that `Madhya Pradesh
Electricity Board has to pay only for the design energy, which the project
shall generate in any given circumstance. If this is not achieved the
payment will be reduced proportionately'. They say that the claim by NBA
that MPEB will have to pay between Rs 600 crores to Rs 800 crores to them
per annum is `completely baseless'. The reality of the truth behind the
stand of S. Kumars and the NBA can come out only through public debate.
This column is open for this debate.
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