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DAM-L LS: Action Alert! M.P. Government to put in equity into Maheshwar (fwd)
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Date: Tue, 6 Nov 2001 14:02:21 -0800 (PST)
Message-ID: <200111062202.fA6M2L414084@DaVinci.NetVista.net>
Subject: LS: Action Alert! M.P. Government to put in equity into Maheshwar
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Dear Friends,
The Madhya Pradesh government is planning to put in equity into the
Maheshwar
Project to save this dying Project. They have a meeting with the S.Kumars on
the 7th of November,2001. Therefore we must act to oppose it urgently .
Please
get as many signatures on the following letter and fax it to Shri Digvijay
Singh, CM.M.P.at 0755-540501. Their phone number is 0755-661503. Also then
post
the letter to Bhopal address of the CM and send a copy to NBA at the address
mentioned below. Also kindly release the signed letter to the press in your
city.
In solidarity,
SILVY
To,
Shri Digvijay Singh,
Chief Minister,
Madhya Pradesh,
Vallabh Bhavan,
Bhopal
4.11.2001
Sub: Call for Madhya Pradesh government not to participate in the equity of
the Maheshwar Project and to scrap the Project in public interest.
Dear Shri Digvijay Singhji,
We are writing to you with a certain amount of concern today about the
proposed involvement of the Madhya Pradesh government in the equity of the
sinking Maheshwar Project being built in the Narmada valley in Madhya
Pradesh.
We have watched the progress of this Project and have witnessed how year
after
year successive investors have withdrawn from the Project in 1998, the US
utility PacGen, in 1999- the German utilities - VEW Energie and Bayernwerk
and
in 2000 the US utility Ogden Energy left the Project because of the struggle
on the ground and the bad economics of the Project. We have also seen the
strength of the affected people struggling against this Project and have
been
impressed with their non- violent struggle and the clarity and the
credibility
of their issues.
The experience of Sardar Sarovar upstream of the Maheshwar dam has shown us
that actual land based rehabilitation is not possible for the affected
people
and that any cash compensation that is given, will ultimately lead to the
penury of the local people. In the absence of cultivable land, the 50,000 to
60,000 people living in the Maheshwar dam impact zone the farmers who
cultivate the deep, black cotton soils in the area, fisherpeople who fish,
work on the sand quarries, and cultivate the river draw-down will all
eventually come on to the roads. Obviously, in a democracy, this process of
pauperization of people and the denial of their rights is completely
unacceptable.
But our concern about this controversial Project is not about the issues of
displacement of these thousands of people alone. We are also deeply
concerned
about the economics of the Project and how it will impact the economy of
Madhya Pradesh. This Project will supply less than 5% of the total energy
production. Yet, it will draw around 20% of the revenues of Madhya Pradesh.
It
is clear that this makes NO economic sense at all. The production of this
limited amount of power, the guaranteed payments and the prohibitively high
tariffs for this power over Rs. 6 per unit, because of extremely high
capital
costs that have been inflated over the years will all contribute to make
this
a Project that will cripple the economy of Madhya Pradesh.
In order to pay for the Maheshwar power, the Madhya Pradesh government will
have to fork out Rs. 600 crores per year for the next 35 years, even if the
water flows have decreased the amount of power produced, or even if this
expensive power cannot be sold. Since the Madhya Pradesh government does not
have the economics to make this payment the Shivraman Committee expressly
stated in 2001 " The (Madhya Pradesh State Electricity ) Board is today in
no
position to give any escrow cover as it has huge outstandings of current
dues
and default on bonds."
It is clear that these compulsory payments that the Project promoters of the
Maheshwar Project are guaranteed to receive from the state government will
jeopardize the economic health of the Madhya Pradesh government, raise the
power tariffs exorbitantly, pauperize the peasantry and industrial workers
whose livelihoods depend on electricity, and bring darkness to the homes of
the farmers and common people.
We are aware of the power situation in Madhya Pradesh right now and the lack
of liquidity to arrange for the shortfall in the power in the state. This is
what makes us more anxious. If the Madhya Pradesh government cannot buy
power
at Rs. 1.70 per unit from the NTPC, and at Rs. 2.20 from Chattisgarh, which
is
willing to sell it large amounts of power, how will it be able to buy and
why
should it buy power from the Maheshwar Project at Rs. 6 per unit?
We understand that if Madhya Pradesh wants to improve its power situation,
it
must first improve its revenue situation and liquidity through universal
metering and measurement, cutting of T&D losses in the state from the figure
of 47 %. Even a small saving in the T&D sector will be able to take care of
the situation. The other priorities seem to us to be emphasis on
modernization
and retrofitting measures leading to higher PLF's of the existing plants,
demand and supply side management measures, etc.
The Enron story that has before the whole nation unfolded in the last 8
months
has shown to us the prospect of power production through the IPPs
(Independent
Power Projects) such as Enron and Maheshwar are turning out to be veritable
mirages. The learning from the Enron experience is at no small cost to the
nation and to the state of Maharashtra. The Godbole Committee that reviewed
this Project has pointed out that the decisions around Enron reflected a
failure of governance and a lack of due diligence. These failures and the
factors behind them are being sought to be investigated now through a
judicial
enquiry. We wonder why is necessary to replicate the same situation at
Maheshwar and learn only post facto - after having jeopardizing enormous
amounts of public money.
We also note the facts that have come to light in the last few days the fact
that the S.Kumars are yet to pay the NVDA, M.P. Govt Rs. 10.47 crores and
the
MPEB 86.11 crores (including the Pench Project) for taking over the Project
although it was transferred in 1992-1993, as per the CAG (Comptroller and
Auditor General of India) Reports of 1999 and 2000 filed in the Madhya
Pradesh
Vidhan Sabha. We also note that the Madhya Pradesh State Industrial
Development Corporation Ltd. (MPSIDC) had given a large amount of money to
the
Induj Enertech Ltd. the S.Kumars company of which the SMHPCL is a wholly
held
subsidiary and that the S.Kumars have defaulted on the loan. The Economic
Times carried a public notice issued by the MPSIDC on the 13th of September,
2001 that it would institute winding up measures against the Induj Enertech
Ltd. for default on Rs. 11.07 crores.
The NBA has also brought to light in the last few months certain very
disturbing facts about the public financing of the Project. It has quoted
the
report of the Indian financial institutions (the IFCI) to show that nearly
Rs.
106.4 crores of money was given as advances to companies who had no Project
contracts. We can only infer from the above the existence of large-scale
diversion of public funds.
In this situation, the IDBI have instituted a review of the Project. On the
other hand, it has come to our knowledge that a desperate S.Kumars is now
asking the Madhya Pradesh government to contribute a significant section of
the Project equity no doubt with the intention of converting the above
mentioned loans and pending payments that it owes to the Madhya Pradesh
government that it has either not paid or defaulted on - into equity and
saving this disastrous Project.
In the circumstances, we wish to share with you our view that it would be
financially disastrous decision for the Madhya Pradesh government to
contribute the equity of the Maheshwar Project witness the tragic
participation of the Maharashtra government in Enron. The Maheshwar project
is
technically, financially and socially unviable. We call on the Madhya
Pradesh
government not to make the folly of further participating and jeopardizing
public money in this destructive and non-viable Project that too with a
company that has already defaulted on crores of rupees belonging to the
Madhya
Pradesh government. On the contrary, the Madhya Pradesh government must
immediately scrap the PPA and cancel the Project. Otherwise it will open
itself to charges of deviating from the public interest and worsening the
situation of power in the state. The political backlash in Madhya Pradesh as
for Enron in Mahrashtra will be enormous.
We trust that you will appreciate these concerns and will not subordinate
the
public interest of the people of Madhya Pradesh to the interest of private
companies.
Warm regards,
Yours sincerely
Name Address Signature
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