| NBA Press Release
|| 06 March 2005
Attempt to restart Maheshwar Project an attempt to destroy state economy
NARMADA BACHAO ANDOLAN
Jail Road, Mandleshwar
District Khargone, Madhya Pradesh
Tel: 07283-233162, 9425087827, 9425056802
CBI must conduct enquiry into misuse of public money by S.Kumars, Oustees will launch strong struggle to save Maheshwar area and state.
In the recent months the Chief Minister of Madhya Pradesh Shri Babulal Gaur has made repeated statements about re-starting the Maheshwar Project, and attempts have been made to start some minor work on the site since the last one week. The attempt by the state government to re-start work on the Maheshwar site which was attached by the MPSIDC (Madhya Pradesh State Industrial Corporation) in late 2002 because of the willful default by the S.Kumars group on an outstanding loan of Rs. 82 crores taken from the MPSIDC, is illegal and a clear attempt to jeopardize further amounts of public money. The Narmada Bachao Andolan demands that the state government must take immediate steps to recover this public money and scrap the high cost and destructive Maheshwar project that threatens to be another Enron once and for all, and express their determination to offer stiff opposition to the Maheshwar dam. The Narmada Bachao Andolan also calls on the Reserve Bank of India to investigate the entire financial practices of the S.Kumars group through the CBI in the view of the dark track record of this corporate group, including multiple willful defaults on public money.
It may be noted that the Maheshwar Project is to be built on the Narmada river and is a privatized project that was given to the S.Kumars group in 1992. This Project, if built is slated to submerge homes and irrigated agricultural lands of over 50,000 farmers, fisher people and boatpeople in 61 villages in the fertile plains of the Narmada valley, scores of sand quarries, hundreds of acres of riverbed draw-down land and the richest fresh water fisheries in the Narmada valley. This project is also slated to produce extensive waterlogging. Within a decade of privatization of this project, the proposed outlay for this Project has been increased by five times from Rs. 465 crores to Rs. 2233 crores. It is now anticipated that the cost of this Project will around Rs. 5-6 per kWh. It is clear that the State Electricity Board can buy neither by ordinary consumers nor such expensive power. Yet, the Power Purchase Agreement for this Project states that the Government of Madhya Pradesh will have to pay the promoters around Rs. 500 crores annually for the next 35 years whether this power can be sold or not, and whether it is even produced or not for the first seven years. Thus starting this Project whose power may not even be possible to purchase would still mean putting Rs. 15,000 crores in jeopardy.
Where has gone this public money ?
· The Report of the CAG of India (Commercial No. 3 of 2004) for the year ending March 2003 severely indicted the Power Finance Corporation - the prestigious financial institution belonging to the Ministry of Power, for irregular disbursement of loans of nearly Rs. 100 crores to the S.Kumars promoted Shree Maheshwar Hydel Power Corporation Limited, and for placing the huge sum of Rs. 140 crores of public money in jeopardy. The CAG says that the PFC acted "without ensuring the (S.Kumars) compliance to pre-disbursement conditions as stipulated in the loan agreements, which was irregular", and which has led to the PFC facing "the risk of potential loss of Rs.99.32 crore, besides loss of interest amounting to Rs.39.54 crore." This includes the crucial condition that the S.Kumars bring in their full share of equity, before the loans from the Indian public financial institutions are disbursed.
· The CAG report of the year ending 2000, had also pointed out that the MPSIDC Board (Madhya Pradesh State Industrial Development Corporation Limited) had loaned Rs. 8.02 crores of money under irregular circumstances to the S.Kumars company - Induj Enertech and had violated the maximum allowable lending limit of Rs. 3 crores. Further, the S.Kumars refused to pay back this irregularly obtained money despite their posting profits over those years. In September, 2001, the MPSIDC publicly declared the borrowing S.Kumars company, Induj Enertech Limited as a "willful defaulter".
· However, without paying back first loan taken from the MPSIDC, in 1999-2000, Induj Enertech obtained a second loan of Rs. 44.75 crores from the MPSIDC for the financing of the Maheshwar Project. When the Induj Enertech did not pay back even this loan, in September 2001, the MPSIDC issued a Revenue Recovery Certificate and instructed the District administration of Khargone to recover the outstanding amount from the attachment and sale of the movable and immovable properties of the Maheshwar project. In December 2002, the immovable properties including the dam site lands of the Maheshwar Project were attached by the district administration. Since the entire outstanding amount on this loan is not recoverable from the immovable properties of the Maheshwar Project alone, the MPSIDC issued further Revenue Recovery Certificates to make the recoveries from the properties of the Directors of the S.Kumars situated in Mumbai and Indore.
· Earlier, the CAG Reports of the years ending 1998 and 2000 had noted that the S.Kumars are yet to pay the state agencies - MPEB (Madhya Pradesh Electricity Board) and the NVDA (Narmada Valley Development Authority) Rs. 86 crores and Rs. 10.47 crores respectively for the properties that they took over from these agencies in 1992,and enjoyed for over a decade.
· The Reappraisal Report of the IFCI of March 2000, the lead agency of the lending consortium also brought out the shocking fact that the S.Kumars gave Rs. 106.4 crores of project funds slated for the construction of the Maheshwar Project to agencies who had no contracts for the project and who did no work on the project. The report also noted that the S.Kumars gave another Rs. 19.3 crores of the project funds to its group company - the Induj Enertech Limited without any contracts for the Project.
· That in 2002, the SBI Caps had filed a winding up petition under Section 434 of the Companies Act, 1956 against the SMHPCL for non- payment of dues worth Rs. 3.7 crores plus interest in the Indore High Court and a winding up petition under Section 434 of the Companies Act, 1956 against S.Kumars Nationwide Ltd. in the Mumbai High Court. In May 2002, the SBI Caps also started separate legal proceedings under Section 138 of the Negotiable Instruments Act against the textile firm for issuing post date cheques that have bounced.
· Just two months ago, on the 25th of March 2004, the Income Tax department attached the Indore based factory of the S.Kumars Nationwide Limited (SKNL) - the flagship company of the S.Kumars for the non-payment of income tax dues including interest accumulated on the tax. In 2002, the IFCI and the IDBI had found the SKNL to be a willful defaulter on huge loans taken from them, and had also found that the SKNL had diverted the loan to another division without their permission.
Solution to the electricity question
Almost 45% today of the total electricity generated and available in Madhya Pradesh is being lost through transmission and distribution losses, which in many countries of the world is not even 10%. If even a small portion of these losses are curtailed, this saving can make far more electricity available, than is slated to be produced by the Maheshwar Project. As per the figures given by the MPSEB in front of the MPERC (Madhya Pradesh State Electricity Regulatory Commission) this option for the same amount of electricity as will be generated by the Maheshwar Project will cost less than one third of Maheshwar costs, while saving large parts of the rural production economy,environment and society.
Struggle to save the state economy
The Narmada Bachao Andolan demands that instead of illegally restarting the work, the state government should immediately scrap the Maheshwar Project. The Narmada Bachao Andolan also calls on the Reserve Bank of India and the Union Finance Ministry to investigate the entire financial practices of the S.Kumars group through the CBI, in the view of the dark track record of this corporate group, including multiple willful defaults on public money, and ensure the recoveries of these monies. In this context, the role of the banks and financial institutions that have set aside all norms of prudence and jeopardized public money in this Project also needs to be investigated.
Any institution that gives public money into such a project in the given circumstances would be culpable of criminal misconduct under the "Prevention of Corruption Act,1988". The NBA would be serving legal notices to all financial institutions, the state and Central government and the RBI in this context. If the state government does not take any decisive action on this issue in the next fortnight, the affected people will hold a huge public demonstration to mark the beginning of a new phase of struggle against this Project.
Sushila Bai - Sarpanch, Mardana, Teh. Barwah
Yashwant Mandloi - Janpad Representative
Lakshman Patidar - Sulgaon, Teh. Maheshwar
Rameshwar Birle - Bhatiyan, Teh. Kasrwad