Wednesday, 21 APRIL 1999


India's controversial Maheshwar Dam is once more in crisis as two major partners in the project, German utilities Bayernwerk and Vereinigte Elektrizitätswerke Westfalen (VEW), stated this week they will no longer invest in the dam. The utilities together would have acquired 49% of the equity in the dam which is being built across the Narmada River in the central Indian state of Madhya Pradesh.

The utilities' withdrawal comes as seven community leaders - five from villages to be drowned by Maheshwar - enter the eleventh day of an indefinite hunger strike in protest against dams in the Narmada Valley. The hunger strikers are among 500 farmers and fishers who have been camped out since April 7 in front of the residence of Digvijay Singh, Chief Minister of Madhya Pradesh. [1]

In 1993 the Madhya Pradesh government gave the concession for Maheshwar Dam to an Indian textile company, S. Kumars, which then formed the Shree Maheshwar Hydropower Corporation (SMHPC) to build and operate the project. Oregon-based utility PacifiCorp was the original foreign equity holder in SMHPC but withdrew in May 1988 stating concerns over social impacts and local opposition. PacifiCorp's stake in SMHPC was then taken over by Bayernwerk and VEW.

Dr. Joachim Adams, President of VEW's Board, has stated that "VEW is no longer involved in Maheshwar and is not planning to become involved in the future". A spokesperson for Bayernwerk noted, "Our contracts with the SMHPC have run out. We would only be willing to consider involvement in the project anew if the authorities are able to provide land-for-land
resettlement, with land of sufficient quality as per the conditions of the Madhya Pradesh State rehabilitation policy for the Narmada Projects".

Although no reliable surveys exist it is believed that Maheshwar Dam would displace over 20,000 people in one of India's most prosperous agricultural regions. No credible plan exists for providing these people with replacement land or livelihoods. Fierce local opposition to the project has resulted in a number of dam site occupations and numerous beatings and arrests at the hands of the police.

A broad coalition of 120 German non-governmental organizations (NGOs) had urged German companies involved to respect the wishes of project-affected people and withdraw. In December 1998, a German environment and human-rights organisation, Urgewald, undertook an on-site investigation of the project. An English summary of its report has just been released. [2]

During its investigation, Urgewald visited ten villages in the submergence zone of the dam and met with the project promoter, S. Kumars, and the state agency responsible for resettlement.

"What we found was a total lack of credible resettlement planning, a shocking disregard for the truth in project documents, and systematic violations of the rights of affected people. In effect, there is no land available for rehabilitation. The lands being offered either lie in the
submergence zone of the dam or already belong to other communities," says Ms Heffa Schücking of Urgewald.

Urgewald's report also questions the economic viability of the Maheshwar project. It describes in detail the thriving economy of the project area and concludes: "If a cost-benefit analysis were based on the true costs of replacing the assets and livelihoods of these communities, it is our firm conviction that this project could no longer be considered economically viable".

"We are pleased to note that our investigation helped convince German utility companies to withdraw" adds Ms Schücking.

The withdrawal of VEW and Bayernwerk still leaves a number of foreign companies involved in Maheshwar. German engineering multinational Siemens is still committed to contributing a non-voting share of 17% of project equity in return for a contract to provide turbines and generators. Swiss-Swedish firm ABB is also to provide generating equipment.

Almost half of the financing for Maheshwar was to be provided by the German HypoVereinsbank through a $257 million export loan. The Siemens and HypoVereinsbank participation has been thrown into question by the utilities' withdrawal and the fact that preliminary commitments from the German government to provide export credit and investment guarantees for Maheshwar have become void.

"In view of the severe negative impacts of the project, we think it is unlikely that the German government would grant a new guarantee", explains Ms. Schücking. In its coalition agreement the new German government has made a commitment to introduce environmental, social and developmental criteria for the approval of export credit guarantees.

Mr Alok Agarwal of the Narmada Bachao Andolan (Save the Narmada Movement) says: "Large dams are very risky ventures and rightfully have trouble attracting foreign investors. In the case of the Narmada Valley this is even more true, because of the strength of people's resistance to these projects. The ongoing fast in Bhopal is thus not only a signal to the Government of Madhya Pradesh, but also a warning to foreign companies to stay away from destructive projects in the Narmada Valley".

"The withdrawal of PacifiCorp, VEW and Bayernwerk and the ongoing protests in India should provide a clear warning to Siemens, ABB, HypoVereinsbank and any other potential foreign investors to stay well clear of the Maheshwar Dam", says Mr Patrick McCully, Campaigns Director of the Berkeley- International Rivers Network (IRN).

"Any foreign investor which gets involved in dams in the Narmada Valley is going to risk international censure as well as lose money," adds McCully.

Maheshwar is part of the Narmada Valley Development Project which envisages the construction of 30 large and 135 medium-sized dams in the Narmada Valley. The most notorious of these projects has been the mammoth Sardar Sarovar Dam under construction downstream from Maheshwar in Gujarat state.
Due to massive protests in the Valley, the World Bank and bilateral aid donors stopped financial support for large dams on the Narmada in the early 1990s. Maheshwar is the first attempt to finance one of these projects through the private sector.


[1] The protesters are demanding that the Madhya Pradesh government halt construction on Maheshwar until the completion of a comprehensive and participatory review of the costs, benefits and alternatives to the project. These actions have been recommended by a task force established by the Madhya Pradesh government in early 1998 to review the Narmada Valley Projects and prepare a framework of alternatives for the development of water and energy resources in the valley. The Task Force submitted an overall report in January 1999 and a separate report on Maheshwar in October 1998. The reports acknowledge the grave resettlement situation and recommend a completely different approach to the development of water and energy resources. They also recommend that no projects should be carried out in which resettlement and environmental protection cannot be ensured.

[2] 'The Maheshwar Dam in India: A Travel Report', Heffa Schücking, Urgewald, March 1999.

Just released:

A Report by Heffa Schücking

For more information, contact:

  • Heffa Schücking
    Tel: (49)-2583-1031
    Fax: (49)-2583-4220
    Email: urgewald@koeln.netsurf.de
  • Patrick McCully
    International Rivers Network
    Tel: 1 510 848 1155 ext. 317
    Fax. +1 510 848 1008
    Email: patrick@irn.org.