| NBA Press Release
|| 05 April 2002
Madhya Pradesh government jeopardizes public interest in granting in-principle guarantee to Maheshwar project
NARMADA BACHAO ANDOLAN
Jail Road, Mandleshwar
District Khargone, Madhya Pradesh
The Narmada Bachao Andolan expresses deep surprise and shock at the recent decision of the Madhya Pradesh government taken in the meeting of the state cabinet on the 28th March last, to give an in-principle stand by guarantee for public bonds worth Rs. 330 crores to be issued by the Project promoters of the Maheshwar Project the S.Kumars. It condemns this anti-people decision and demands that this guarantee must be immediately taken back. It also demands that the Project should be scrapped, all public money should be recalled from the Project and punitive action should be taken against all responsible officials. It is clear that the meaning of giving a guarantee to the controversial Maheshwar Project that will not only produce very expensive electricity but also very little electricity, and which has been at the center of financial irregularities means privileging the interests of the Private promoters above public interest. It is also absurd that at the very time that orders have been passed to confiscate the movable properties of the Maheshwar Project at the instructions of a state government agency for willful default, the Madhya Pradesh government gives a guarantee to the same defaulting Project promoter for the same Project.
The NBA points out that the S.Kumars and the Maheshwar Project has become the sticky center of an unholy financial mess of outstanding dues, defaults and diversions. No less than the CAG of India have pointed out that in their Reports of 1998 and 2000, that the S.Kumars are yet to pay the two Madhya Pradesh state agencies MPEB and NVDA the sums amounting to crores of rupees that have been outstanding to them since 1992 when the project was privatized, while the S.Kumars continue to enjoy the properties that had been developed by these two state government agencies and all other concessions granted to it under the Power Purchase Agreement.
The CAG has also pointed out that yet another Madhya Pradesh state government agency this time the Madhya Pradesh State Industrial Development Corporation Limited gave large sums of money to the Induj Enertech Limited a S.Kumars company and the holding company of the Shree Maheshwar Hydel Power Corporation Limited much in excess of the limits allowed to the Board of the MPSIDC. The CAG Report of 2000 points out that the MPSIDC gave the Induj Rs. 8.02 crores in 1997-98 when it was allowed to give only Rs. 3 crores. Similarly, it has come to light that the MPSIDC gave the Induj Enertech Limited a further Rs. 45 crores in 1999-2000, for the express purpose of financing the Maheswar Project, once more in violation of the Rs. 3 crore limit. However the Induj Enertech Limited has defaulted on both amounts of money both the first tranche of Rs. 8.02 crores first taken in 1997-98 and the second tranche of Rs. 44.75 crores taken in 1999-2000. On the 13th of September, 2001, it issued a public notice in the The Economic Times, Mumbai stating that the Induj was a "wilful defaulter". The MPSIDC also issued a Revenue Recovery Certificate on the 10th of September 2001 for the recovery of the outstanding amount on the Rs 45 crore loan to the S.Kumars, to the District administration of Khargone asking them to make recoveries from the movable and immovable properties of the Maheshwar Project. Subsequently, the Recovery Officer passed an order confiscating the movable properties of the Project in late February 2002.
It may also be noted that the IFCI reappraisal note of March 2000 documents in lack and white that the S.Kumars had diverted Rs. 106.4 crores of public money advanced for the Maheshwar Project to agencies that neither had any contracts for the Project nor did any work for it. In fact, the NBA had taken the matters to both RBI and CAG and as per recent newspaper reports , in a letter from Yashwant Sinha , the Ministry of Finance had refused to give the Project any further public monies from the Indian public institutions and banks in light of the fact that the S.Kumars as well as the state government were persistent defaulters. The over draft crisis of the state of Madhya Pradesh that has occurred SEVEN times in the last one year causing the RBI to issue directives to banks and state treasuries not to clear payments to Madhya Pradesh underscores the financial fragility of Madhya Pradesh. In the circumstances, it is clear that for the Madhya Pradesh government to give a guarantee to the S.Kumars is financial suicide for the state and cannot be justified by any means. Enron has already shown to the nation that guarantees given on considerations that set aside public interest can later prove to be a mill stone around the neck Rs. 6250 crores of public money jeopardized in the case of Enron.
It may be noted that the apex banking institution- the RBI and the apex parliamentary body- the Parliamentary Committee on Finance have increasingly begun to insist on the implementation of strict regulations and the use of prudential norms in all investment decisions of public money. These institutions and forums have taken cognizance of the fact that the completely outrageous situation that exists in the country today over Rs. 80,000 crores of public money converted into bad loans or of Non Performing Assets has been due to bad financial investment decisions of the financial institutions and banks including practices such as "evergreening" or lending repeatedly to defaulters on one hand, and the misuse and appropriation of crores of rupees of public money by certain cynical and unscrupulous industrialists on the other. As a result, on the 9th of January 2002, the RBI has issued a circular clearly warning the banks and financial institutions from subscribing to debentures, bonds and shares of defaulting companies/entities. In March 2002, the Parliamentary Committee on Finance has also pulled up the RBI, the financial institutions and the Ministry of Finance for not taking sufficient cognizance of the diversion of public funds by corporates and in fact deliberately under reporting them.
In the circumstances, that active efforts are being made to institute prudential norms all over the financial sector in order to address the "lack of accountability of Indian corporates", at best it can only be extreme perversity on behalf of the Digvijay Singh government to give an in principle guarantee to the S.Kumars for the Maheshwar Project at a time when the Project has large scale outstanding dues to two state government agencies and its holding company is in default to yet another state agency the MPSIDC that has declared it a willful defaulter, and on whose instructions an order to confiscate the movable properties of the Maheshwar Project has already been passed in late February 2002 ! At worst it could be that other considerations have over ruled the considerations of public interest for the Madhya Pradesh government.
It may be noted that the issues raised by the strong mass movement against the Maheshwar Project have demonstrated that while the power to be produced by this Project is prohibitively expensive, over 60,000 people will stand to lose their lands, homes and livelihoods because of the project whose rehabilitation is well nigh impossible. The departure of five US and German power utilities and the refusal of the German and Portugese governments from this controversial Project has also demonstrated that this Project is socially, technically and financially unviable.
The NBA reiterates that it will oppose this loot of public money and calls on the Madhya Pradesh government to see better sense and immediately take back this guarantee. It also demands that the Project should be scrapped, all public money should be recalled from the Project and punitive action should be taken against all responsible officials. The NBA will be sending legal notices to the Chief Secretary of Madhya Pradesh, as well as the Chairman, MPEB, and Finance Secretary, GOMP, and Energy Secretary on this issue in the coming week. It intends to, by taking this debate to the appropriate investigative and decision-making forums, and through public action, to expose the truth behind the Project.