$ 1.6 billion Sawalkot hydel project
Cloak of secrecy fails to cover up fishy deal

Kashmir Times, May 15/16, 2001


JAMMU, May 14 : The 600 MW Sawalkote hydel project planned over river Chenab in militancy infested district Doda is being looked at with suspicious eyes describing it as a ‘political’ project which is going to make money for everyone except Indian financial institutions. The agreement was signed at New Delhi in a haste without asking for any bids especially when an agency already working in Jammu and Kashmir had offered substantially lower prices.

According to a report published in the May issue of the weekly magazine Outlook, "many questions pertaining to Sawalkote hydel project had remained unanswered by either the executing or funding agencies including the state government as well as the central government. Many eyebrows were raised on the manner in which agreement was signed".

It was an agreement signed by Henning Fjeldstad, executive vice-president of NCC International AS of Norway (which along with Germany's Hochtief AG, will execute the project on turnkey basis) and representatives of Jammu and Kashmir Power Development Corporation (JKPDC) on April 21, 2001 in presence of visiting Norwegian prime minister, Jens Stoltenberg, state chief minister Farooq Abdullah, his son and union minister of state for commerce Omar Abdullah and senior state officials.

The report published in 'Outlook' revealed that no bids were called for the project and power minister Suresh Prabhu was also conspicuous by his absence who according to the report attended the Indo-Norwegian seminar on power at the same venue but did not attend the signing ceremony. The power ministry had also voiced its concerns about the project’s funding but was overruled by the Prime Minister's Office (PMO).

Other than this, there were countless loose ends in the project which was first mooted in 1984-85 and then forgotten till Farooq Abdullah resurrected it a couple of years ago, the report said adding that the project was signed between NCC International and JKPDC valuing $660 million and the total cost of the project was $1.6 billion.

The Norwegian consortium, as per the agreement was expected to raise 85 per cent of the money but in reality the burden lies on Indian government. Going into the details published in the magazine, the Norwegian consortium has promised $220 million only on the condition that Indian state-owned financial institutions give a counter guarantee for the same.

Three financial institutions Industrial development Bank of India (IDBI), State Bank of India (SBI) and Power Finance Corporation (PFC) were the first to come forward to agree to finance the project upto the tune of $450 million. This amount was inclusive of $435 million of external commercial borrowings which were also counter guaranteed by the three financial institutions IDBI, SBI and PFC.

The JKPDC was left with $ 180 million to arrange for the project. However, the Norwegians again came for the help of cash starved JKPDC by agreeing to help raise the money but with a question mark. Some one will have to furnish the counter guarantee. Contrary to the fact the chief minister in a statement had said that since the Norwegian consortium had not insisted for counter guarantee, the Sawalkote project has been assigned to them. On the other hand Fjeldstad, according to report published in 'Outlook' said, NCC's negotiations were still on with Stockholm’s Nordic Investment Bank (NIB) for a counter guarantee and there was nothing wrong in it. Counter guarantees were a necessity in power projects especially in politically volatile regions.

Interestingly the Indian institutions were tight lipped on the deal struck between them and the foreign consortium. But the fact was that these Indian financial institutions were being forced to furnish counter gaurantees for Sawalkote on the plea that the project was going to generate great employment for the troubled Valley.

The 'Outlook' report says,"in other words, this is a social sector funding by another name. But even if we accept that, is this the right project to fund ?"

Another major drawback found in the project for which the state government signed a MOU at Delhi was that the Norwegian environmental organisation in its feasibility report had admitted that the study done by it cannot be classified as a full environment impact assessment (EIA) but just a forerunner of EIA as the company representatives could not visit all the project downstream areas due to security reasons.

It was estimated that around 200 to 220 houses will be flooded and probably over 1000 people will be displaced - the rehabilitation plan for which was yet to be made by the consortium.

According to Global analysts, hydel power projects costs normally hover around Rs 3 to 3.6 crore per MW. But in case of Sawalkote it was logging in at about Rs 12 crore per MW. Comparing with the allegedly overpriced 2100 MW Enron project which was being constructed at a cost of $ 2.8 billion or Rs 6.1 crore per MW, the Sawalkote project was estimated at a much higher side.

This seems huge, even taking into account the difficult terrain, where NCC will have to spend the first two years simply building access roads to the site, the report said.

A controversy was also revolving around the project taking into account its Levelised Tariff Price (LTP) at Rs 3.60 per unit as per the contract. Power ministry regulations categorically say no LTP can be finalised unless a Power Purchase Agreement (PPA) is signed. And till date the JKPDC has not signed any PPA.

A question mark has been put at the end stating that how can a power project worth $1.6 billion have such a low tariff. Power from Dulhasti in the same Chenab Valley is projected to come to a massive Rs 11 per unit. Another question was haunting the experts who say that at a time when the state government was unable to collect even Rs 2 per unit who was going to collect money for the power produced from Sawalkote.

The 'Outlook' report said, "there is clear admission that the project will have huge sedimentation problems and yet the document says nothing about what needs to be done, according to Himanshu Thakkar of South Asian Network of Dams, Rivers and People.

With people of the state kept in darkness by the state government by not divulging details of the projects and modalities worked out on the project, the chief minister Farooq Abdullah had constantly been projecting that a transparency is being maintained at every level to ensure that the working of the government is assessed and screened by the people who had elected him to power with two third majority in 1996.

This is the story of just one project and the state had signed MOUs for seven power projects in Jammu and Kashmir leaving it for the people to assess what else must have been cooked in rest of the deals.