A project for power

Print edition : September 08, 2006

UTTAR PRADESH CHIEF Minister Mulayam Singh Yadav and his Samajwadi Party colleague Amar Singh join Anil Ambani and his wife Tina Ambani in the `bhumi puja' for the Dadri power project in February 2004. - S. ARNEJA

IF the projections of the Uttar Pradesh government and Anil Ambani at the time of announcing the Dadri mega power project had become a reality, preparations would have been on in full swing in Ghaziabad district to supply electricity to different regions of Uttar Pradesh and other States in North India.

The first announcement of the then undivided Reliance Industries Limited (RIL) and the Uttar Pradesh government on the project was made on February 18, 2004. It outlined a 7,480 megawatt (MW) gas-based power project, to be completed in two phases at an estimated cost of Rs.18,000 crores.

The first phase was to generate 3,740 MW at a cost of approximately Rs.10,000 crores. It was also stated that this first phase would be completed in 2006-07. With two-thirds of 2006 virtually over, there are no signs of the project nearing completion.

The delay is not the only complaint against the Dadri project and its promoters. Almost all aspects of the project - the manner in which it was awarded, the quantum of land acquired, the subsidies provided in the acquisition, and finally the very supply of gas to run the power station - are mired in controversy. A sizable number of observers of Indian industry are of the view that it was the very announcement of the project by Anil Ambani that triggered the split in the Reliance empire.

It was mentioned in many fora during the run-up to the split that Anil Ambani had not taken Mukesh Ambani into confidence before announcing the project and that brought to a head the already simmering differences between the brothers.

Some observers of industry were also of the view that Anil Ambani's announcement was the result of excessive association with Samajwadi Party (S.P.) leaders such as Mulayam Singh Yadav and Amar Singh, and that Mukesh Ambani resented it. Many observers also pointed out that the Reliance group, through the period of its founder Dhirubhai Ambani, had always refrained from completely identifying with any political party. According to a close associate of Dhirubhai Ambani, the group's motto vis-a-vis political parties was "good relations with everybody and especially good relations with the ruling party".

The days following the announcement of the Dadri project witnessed Anil Ambani's election to the Rajya Sabha - on June 26, 2004 - from Uttar Pradesh with the backing of the S.P. and the aggravation of his problems with Mukesh Ambani. The differences between the brothers grew into uncontrollable proportions over the next six months and finally, in March 2005, came the decision to split the Reliance empire.

The Dadri project was retained by Anil Ambani and a new company, Reliance Energy Generation Ltd. (REGL), took over that project. In April 2005, REGL announced a revision of the completion schedule. Now the projected completion time for the first phase was 2007-08. The reasons for the delay were obvious, though REGL did not state them specifically. The bitter corporate war between the brothers had taken its toll on the project.

The split did not settle the problems for the project. Questions about land acquisition came up next. Former Prime Minister V.P. Singh and the Lok Sabha member from Agra Raj Babbar - technically still an S.P. Member of Parliament though he has formed his own party, the Jan Dal - launched an agitation alleging that the 2,500 acres (1 acre = 0.4 hectare) allotted for the project was too much for a power station and that the farmers whose land had been acquired had not got sufficient remuneration.

V.P. Singh and Raj Babbar also argued that the government had shown undue favour to Anil Ambani's company by paying 60 per cent of the price of the acquired land from the exchequer.

The government's response is that nothing illegitimate happened on any of these counts. According to Ashok Khurana, Chairman of the Uttar Pradesh Electricity Corporation, the guidelines of the Central Electricity Authority stipulate clearly that 40 acres is required for a 200 MW plant, excluding land for a colony. Going by this calculation, Khurana told Frontline, the Dadri project needed 2,867.33 acres as against the 2,500 acres allotted to it.

Other senior officials in the State Electricity Department say that 90 per cent of those whose land has been acquired are satisfied with the remuneration and that only 10 per cent have joined the agitation led by V.P. Singh and Raj Babbar. As for the government paying 60 per cent of the price of the land, Khurana's explanation is that this was in accordance with the provisions of the State government's power policy formulated in 2003, well before the project was announced.

That policy, Khurana said, had visualised fresh investments in the power sector and introduced subsidies to attract private sector enterprises. It provided for subsidies to the tune of 20 per cent of the cost of land for a project with a capital investment between Rs.1,000 crores and Rs.2,500 crores, 40 per cent for a project with a capital investment between Rs.2,500 crores and Rs.5,000 crores and 60 per cent for a project with a capital investment of more than Rs.5,000 crores. That would explain, said Khurana, why the Dadri project, with an estimated capital cost of Rs.10,000 crores in just the first phase, qualified for the 60 per cent subsidy. He added that other private enterprises in the power sector, including the 2,000 MW Chola project run by the Tatas, enjoyed subsidies in the State on the basis of the 2003 policy.

S.P. leaders such as Amar Singh have pointed out that Raj Babbar was very much a part of their party when the power policy was formulated.

"He did not see any favouritism being shown to Anil Ambani at that point of time. So, his sudden discovery of illegitimate activity in the project is more suspect than the so-called favouritism," Amar Singh told Frontline.

Other S.P. leaders say the allegations against the Dadri project are part of a conspiracy to scuttle it. They alleged that the latest action against the project had come from the Union Petroleum and Natural Gas Ministry itself. The Ministry, headed by Murli Deora of the Congress, has objected to the price at which Mukesh Ambani's Reliance Industries Ltd. (RIL) has agreed to sell gas to Anil Ambani's Reliance Natural Resources Ltd (RNRL) for the project. The government, which gets a share in the profit on gas sales, has said the price is too low.

According to S.P. leaders, this is a game being played in full connivance between Mukesh Ambani's group and the Ministry as the price of gas for the project was fixed nearly a year ago as part of the de-merger agreement when the Reliance split happened. The RNRL has also complained that RIL was going along with the government's objections without revealing all the details of the gas supply arrangement between RNRL and RIL.

Amar Singh's comment on this is that it is a `delay game' played by the `triple M', namely Murli-Mukesh-Mantralaya.

"If the Ministry okays the gas deal today, Dadri will start tomorrow," Amar Singh said.

But the optimism could well be misplaced, given the corporate and political wars associated with the Dadri project. As these tussles promise to continue, it is obvious that the real sufferers are the people of Uttar Pradesh who have faced a perennial power shortage.

Venkitesh Ramakrishnan