| NBA Press Release
|| 21 January 2002
S.Kumars defaults on public money once again, MPSIDC begins legal recovery proceedings under M.P. Public money Act,
NARMADA BACHAO ANDOLAN
Jail Road, Mandleshwar
District Khargone, Madhya Pradesh
In a startling development that may decisively put the controversial and privatized Maheshwar Hydro- Electric Project promoted by the S.Kumars into jeopardy, it has now become evident that the S.Kumars have once again willfully defaulted on public money and this time around the consequences are disastrous for them. It has come to light that the S.Kumars group company ^Ö the Induj Enertech Limited which has defaulted on the outstanding payments of Rs. 19 crores out of a total tranche of Inter- Corporate deposits of Rs. 45 crores taken from the MPSIDC (Madhya Pradesh State Industrial Corporation Ltd) in 1999-2000 for the purpose of financing the Maheshwar Hydro-Electric Project. Following the default, the MPSIDC has now directed that recoveries against the defaulted sum are to be made from the properties of the Maheshwar Hydro-Electric Project in the Khargone district of Madhya Pradesh. It has directed that this recovery be made in the same manner that land arrears are recovered under the Land Revenue Code, 1959, ie. through the attachment and sale of properties.
The MPSIDC has begun legal proceedings for the recovery of this amount under the Madhya Pradesh Public Money (Recovery of Dues) Act, 1988 and has asked the district administration to make the recovery from the moveable and immovable properties of the Maheshwar Hydro- Electric Project. This legal action has now put a grave question mark on the future of this Project.
It may be recalled that the Induj Enertech Ltd. or S.Kumars Power Corporation Ltd. as they were formerly known had taken an earlier loan of Rs. 8.02 crores from the MPSIDC in 1997-98. Subsequently it refused to pay back this money despite posting profits on its balance sheets for the last three years. As a matter of fact, it did even not bother to answer the notices and the letters of the MPSIDC demanding repayment. As a result in September 2001, the MPSIDC was compelled to bring out a public notice in The Economic Times declaring the S.Kumars group company ^Ö the Induj Enertech Ltd. was a willful defaulter and that the MPSIDC was contemplating legal action against the company including instituting a winding up petition. It is clear now, in addition to the wilfull default on the Rs. 8 crores of earlier deposits, the S.Kumars have additionally defaulted on another Rs. 19 crores of principal and interest due against the deposits of 45 crores taken by them from the same financial institution- the MPSIDC in 1999-2000.
In the context of the recent disclosures, coming so closely after earlier information about the financial irregularities surrounding the Project, the NBA demands that the state government immediately issue a White paper on the Maheshwar Project, institute a Judicial enquiry into the imprudent and irregular decision making about investments made by the MPSIDC from 1997 to 2000, and that it scrap the destructive Maheshwar Project once and for all. It may be noted that there has been a strong popular struggle against the Maheshwar Project for the last five years both on counts of the rich resources and communities to be destroyed by the Project as well as the prohibitively expensive electricity to be produced by it, which cannot be used by the common people of the state.
The facts of this recent default are clear enough. As per a letter written by the Managing Director of the Madhya Pradesh State Industrial Corporation Ltd. on the 10th of September 2001, to the District Collector Khargone, the Madhya Pradesh State Industrial Corporation Ltd. ^Ö a government of Madhya Pradesh undertaking had advanced Inter Corporate Deposits of Rs. 44 crores, 75 lakh rupees to the M/s Induj Enertech Ltd. for the purpose of financing the Maheshwar Hydro-Electric Project.
The letter observes that "the Company executed loaning and security documents in favor of the MPSIDC and other facilities by executing DP notes that still remain unpaid." Consequently, the Corporation has decided to issue a Revenue Recovery Certificate under the M.P. Public Money (Recovery of Dues) Act 1987. The Recovery Certificate is for Rs. 18 crores and 97 lakh rupees, plus further interest on quarterly/half yearly compounding basis against ICD amount recoverable from the properties of the Directors of Induj Enertech Limited, namely Ambuj Kasliwal,Vikas Kasliwal and Mukul Kasliwal as well as Shri G.P.Singh and Smt. Rekha Jagdale.
It may be recalled that the CAG Report for the year ended 31 March, 2000 has pointed out that the earlier deposit of Rs. 8.02 crores taken from the MPSIDC which the Induj Enertech has defaulted on, was itself given "in contravention of the powers of the Board as it exceeded Rs.3.00 crore " and was "without prior approval from the state government." The NBA apprehends that this time too the Board of the MPSIDC took the decision to deposit Rs. 45 crores ^Ö Rs. 42 crores more than the outer limits of Rs. 3 crores allowable to any single company, without having changed the norms of investment with the necessary approvals from the state government.
It may also be recalled that the CAG Reports of 1999 and 2000 had noted that although the Maheshwar Hydro-Electric Project was given to the S.Kumars in 1992, the payments of crores of rupees for the existing dam and infrastructure at the time of the takeover is still pending eight years down the line. A Report by the IFCI ^Ö the lead agency for the public lending to the Project has also highlighted the financial mismanagement by the S.Kumars, whereby nearly 106.4 crores of public money that had been borrowed from the Indian financial institutions and banks for the Maheshwar Hydro-Electric Project were given away to companies who did no work on the Project and who never had any approved contracts to do such work in the first place. In fact the IFCI report of March 2000 had directed that the dam building company belonging to the S.Kumars "SMHPCL shall bring back the capital advances of Rs. 1064 million, with interest, given to various agencies who have not been awarded with any project contracts"
The recent revelations about the S.Kumars default on Inter corporate Deposits of Rs. 45 crores taken from the MPSIDC illustrates once again the S.Kumar's complete disregard and contempt for and its mismanagement of public money. Even as the spectacular fall of Enron in the recent months has shown that when the Humpty Dumpty's of the world fall, no possible help from King's horses or men can save them, the prospect of the properties of the barely built, yet public money guzzling Maheshwar dam being sold to pay the debts of the Promoters- the S.Kumars is cautionary indeed. It is clear that there is no way that corporates can dispense of financial good practices without paying heavy costs in the long run, especially if these practices relate to public money. Practices like paying back public money or paying for public properties, using public money for the purpose for which it is earmarked, as well as proper accounting of this money.
The Narmada Bachao Andolan and the people of the Narmada valley would also like to seek an explanation from the Madhya Pradesh government as to why its agencies have been so unusually generous to the S.Kumars, a generosity that is costing the public treasury dearly now.
The NBA has pointed out that the Power Purchase Agreement of the Maheshwar Project executed in 1994 and revised in 1996 is suicidal for the state with its conditions of assured payments to the S.Kumars, irrespective of whether power is produced or not and can be sold or not, and with patently anti-people state guarantees. But despite PPA's all over India being reviewed by states such as Maharashtra and by the financial institutions alike, the Madhya Pradesh government has not acceded to the public demand for the review of the Maheshwar PPA. Neither have the S.Kumars payed the MPEB and the NVDA for the crores of rupees that are due to them for the last nine years even as the S.Kumars continue to enjoy the infrastructures already created by these state agencies at the dam site. Instead of stressing on recoveries of this money, the Madhya Pradesh government and the State Electricity Board had been contemplating converting these outstanding payments into equity into this failing Project. Now in addition the Madhya Pradesh government will also have to answer why or how the state financial institution- the MPSIDC that has an outer investment limit of Rs. 3 crores per company gave the S.Kumars Rs. 8.02 crores in the first instance and Rs. 45 crores in the second instance.
The NBA believes that the Madhya Pradesh government has failed in upholding public interest and has privileged the interests of the private company by its acts of omission and commission. It strongly demands that the Madhya Pradesh government immediately issue a White Paper on the Maheshwar Project. The Narmada Bachao Andolan demands that the the Madhya Pradesh government must immediately make a public statement about what public funds have already been spent on the Project and in which works, what the currently proposed Capital costs for this Project is and what the power tariffs will be at this cost, and finally what sort of guarantees have been given to the Project and how the general public will be forced to pay for the cost of this through increased power tariffs. The Madhya Pradesh government must also make it clear what steps the Khargone District administration has taken pursuant to the Revenue Recovery Certificate issued by the MPSIDC relating to the attachment and sale of the properties of the Maheshwar Project.
The Narmada Bachao Andolan also takes note of the recent statement of the CMD of the National Hydro Power Corporation (NHPC) that they would be willing to construct the Maheshwar dam post the S.Kumars. The NBA would like to point out to the NHPC that the people of the valley are familiar with the record of the NHPC of completing Hydro Projects with massive human rights and social and environmental violations whether in Koel Karo or nearer home in Narmada Sagar in Madhya Pradesh. There is no possibility that the people of the Maheshwar area would acquiesce in such a fate for themselves. They therefore call on the NHPC to keep away from this destructive Project.
Khuman Singh Patel, Village Pathrad
Suresh Verma, Village Lepa
Alok Agarwal, Narmada Bachao Andolan