Private project, public fears

The MoEF halts the Maheshwar project and asks for R&R plans. The move squashes the promoters' attempts to get finances for the project.

AT a time when the Sardar Sarovar Project, the most controversial of the dam projects in the Narmada valley, has been given the green signal, the Ministry of Environment and Forests (MoEF) has asked that work on the Maheshwar hydel project, one of the 30 big dams on the Narmada, be stopped.

The Ministry was spurred into action after a formal complaint by the Narmada Bachao Andolan (NBA), which said that work had re-started on the dam site without a comprehensive rehabilitation plan being submitted. In its letter issued on June 9 to the Government of Madhya Pradesh, the MoEF ordered all work to be stopped at the site until the rehabilitation plan was submitted and was found to be implementable by its Monitoring Committee.

The Maheshwar project has had a fitful existence since its start in 1992, bogged down by objections related to environmental clearances and lack of finance. The stumbling block this time has been resettlement and rehabilitation (R&R) of the affected people, also an issue that has dogged the company right from the start.

The Maheshwar project is India's first privately financed hydroelectric project. The company executing the project, Shree Maheshwar Hydel Power Corporation Limited (SMHPCL) owned by the S. Kumars group, received environmental clearance way back in 1994. (R&R comes under the MoEF in this case because land use requires environmental clearance.) The clearance was conditional, with the stipulation that rehabilitation of the affected people would be completed by 1998. But, the NBA says, when work started on the dam site in 1997-98 there was still no R&R plan. The NBA also says that the "land figures shown to be available for R&R at the time of project clearance were faulty and fudged".

A petition from the NBA had the MoEF sending an investigative team to the site. The team had representatives from the Ministries of Rural Development, Environment and Forests and from the Central Water Commission. Their report confirmed the NBA's allegations, as did two other reports. One was the 1998 report of the State government's Task Force to review the project; the other was a 2000 report of the German Development Ministry, which was prepared when the project authorities approached the German government for a guarantee.

The SMHPCL's deadline for submitting the rehabilitation plan was extended to December 2001. When the MoEF's Monitoring Committee visited the site in February 2002, it found that the company had defaulted yet again: there was no plan in place for the people who would lose their land and homes. The trend continues. There is no comprehensive R&R plan yet.

It is recognised that 61 villages will be affected when the 400 MW project is completed, which means 100,000 people. A cross-section of the population that will be affected has farmers, fishermen, sand quarry workers, people engaged in activities such as draw-down cultivation, and others who depend on the river for a living. However, 8,000 river-dependent families belonging to the Kewat, Kehar and Dalit castes do not figure in the list of people eligible for compensation though they will be severely affected.

Most of the potential oustees are farmers who make a good living in the fertile Nimad region. The Narmada flows benevolently here, bringing down silt but not floods, unlike in the higher reaches, making it an area of high agricultural productivity. Very few of the largely Patidar farming population find it necessary to migrate in search of a living. Acutely aware of their dependence on their land, the Patidars of Nimad have been among the most organised groups against dams in the Narmada valley.

Work at the dam site had been at a standstill since 2001, but began again a few months ago. In addition to its history of non-compliance about R&R, the SMHPCL also has a record of financial problems and has faced numerous obstacles in its attempts to get funding for the project. Since last year, the promoters have renewed efforts to get finances. In this they have, quite inexplicably, received help from the State government.

Consider these facts: The Economic Offences Wing of the Government of Madhya Pradesh has filed charges of criminal conspiracy, cheating and fraud against the promoters. The State had even attached the dam site lands because of wilful default by S. Kumars on a large loan taken from the Madhya Pradesh State Industrial Development Corporation (MPSIDC) about five years ago. Yet, the State government has come forward to help S. Kumars get funding.

The details of the lending by MPSIDC point to the State colluding in the squandering of public money. According to an NBA source, there are criminal charges pending since 2004 under Sections 407, 420 and 120 B of the Indian Penal Code against the S. Kumars directors with regard to the Inter Corporate Deposits scam in Madhya Pradesh. Erstwhile managing directors and officials of the MPSIDC colluded with the managements of 42 companies and disbursed Rs.380 crores in loans, without obtaining proper security, proper appraisal or documentation.

The MPSIDC is empowered to lend only up to Rs.3 crores to any single company, but this rule was flouted. The money allegedly came from employees' provident funds, pension funds, gratuity funds, cooperative banks and institutions. Since the companies defaulted on payment, the depositors had to file cases against the MPSIDC. The Economic Offences Wing filed charges against S. Kumars after the State government obtained the opinion of the Advocate-General of Madhya Pradesh.

The picture changed suddenly last year. Not only was the attached land released for the project, the State government even waived the `security' that the company was required to give to the MPSIDC on condition that the settlement would be secured in equity shares of the SMHPCL, of the face value of Rs.2,937.29 lakhs. Thus, even before the project has started, it carries an additional debt load that in all probability will finally be borne by the public exchequer.

This incomprehensible act of generosity gave the SMHPCL the leg-up it needed to re-start construction of the dam and once again approach financial institutions for funds. NBA sources say the promoters have asked the Industrial Development Bank of India (IDBI), the Life Insurance Corporation of India (LIC) and the General Insurance Company (GIC) to pick up equities worth Rs. 90 crores in the project. Bharat Heavy Electricals Limited (BHEL) has been asked to pick up equities worth Rs.70 crores. The Industrial Finance Corporation of India (IFCI) has been asked to convert its front-end fees, still unpaid by the company, into equities worth Rs.19.5 crores. The promoters are also obtaining loans amounting to Rs.250 crores from the Rural Electrification Corporation, Rs.259 crores from the Housing and Urban Development Corporation Ltd. and Rs.700 crores from the Power Finance Corporation, the sources said.

Sources also said that the company was planning a Rs.700-crore public issue in the near future. Though underwriters have been approached for this, there is as yet no indication of this happening. Of course, with the MoEF stopping work on the project, any public issue plan will have to be put on the back-burner.

The NBA and people from the region have approached the potential equity partners - GIC, LIC, IDBI - to apprise them of the ground realities. They have also met with the heads of regulatory agencies such as the Securities and Exchange Board of India and the Reserve Bank of India.

What with all the controversies surrounding the project, there are questions about its viability. The proposed cost outlay has gone up from Rs.465 crores to Rs.2,233 crores; correspondingly, the price of electricity that the dam will provide has also risen to about Rs.4/kWh. There are also other serious issues involving pricing, including a dubious Power Purchase Agreement. On the whole the realities of the Maheshwar project leave much to be desired.