NBA Press Release
  10 May 2002
Save The Narmada, Save Humanity!

State government misleading public on Maheshwar Project to cover its financial irregularities

B-13, Shivam Flats
Ellora Park,
Tel: 0265-282232

62, Mahatma Gandhi Road,
Madhya Pradesh - 451551
Tel: 07290-22464

The Narmada Bachao Andolan expresses extreme surprise at the distorted facts and the misinformation doled out in the recent press statement of the Madhya Pradesh government defending the Maheshwar Hydro-Electric Project. Since all decisions about the Maheshwar Hydro-Electric Project will crucially impact the energy and financial situation in the state, now and in the future, it was reasonable to expect that the state government would come out with the full facts about the Project in public interest. It is unfortunate that instead, the state government has chosen to issue a completely misleading and factually wrong press statement on this issue, thus subordinating the interests of millions of energy consumers in the state to the private interest of an industrialist.

First of all, about the amount of energy to be produced by the Maheshwar Project and its utility given the present structure of electricity demand. The most authoritative official document on this issue - the Updated Project Report of the Project of 1993 sets out the hydrological data of 27 years, data which is the basis of the technical design of the Project. This data clearly reveals that 79 % of the total energy production from this Project is in the four monsoon months and that only 21% of the electricity production is available for the 8 non- monsoon months. However the demand of electricity is the lowest in the monsoons, since the kharif crop is rain fed and makes very little demands on the grid. On the other hand, since the share of agriculture and electricity demand for irrigation is a very significant 43.2 in the total sale of electricity in the state (as per the Planning Commission Report on the working of SEBs of June 2001), it is the 8 non-monsoon months when water is required for the rabi and the summer crops when there is a real increase in the demand for power. But these are the months when the Masheshwar Project will produce very little power. Thus clearly there is a complete mismatch between the generation of power from the project and the demand for power in the state. It is also clear that there is simply no possibility of the generation of 6 hours electricity by this Project all through the year as claimed by the Government of Madhya Pradesh.

The Madhya Pradesh government has refuted at great length any possible resemblance between the Maheshwar Hydro-Electric Project in the Narmada valley with the high cost Dabhol Project in Maharashtra that has been lying idle for more than a year now despite shortage of electricity in the state, simply because it is so expensive.

The truth is that there are remarkable similarities between the two projects. Dabhol and Maheshwar are both over capitalized, private power projects financed or guaranteed with large chunks of public money. The tariffs and costs of both projects are determined by Power Purchase Agreements and are a function of the capital costs of the Project. Since the capital cost of the Maheshwar Project has gone up by five times from Rs. 465 crores to Rs. 2233 crores, since privatization, (and which cannot be explained because there has no such commensurate increase in the real cost of materials or equipment), the tariff of the Project has become extremely high.

Moreover, as per the Power Purchase Agreements of both Projects, the payments for both Enron and Maheshwar will be on the basis of "deemed generation " or design energy figures. Therefore, whether electricity is produced or not, or can be produced or not because of lack of water, or can be sold or not because it is so expensive, the state government will have to make compulsory payments to the S.Kumars. Both in Enron and in Maheshwar, while the state will have to compulsorily have to buy power from the private promoters- for the next 35 years in the case of Maheshwar and the promoters do not face the risks associated with having to sell their electricity in the market, the promoters will get guaranteed rates of return on electricity ranging from a minimum of 16% and going upto 32%. The distribution of risks and gains is curious - all risks are with the state and the general public because most of the financing is through public money, all the destruction and damage will faced by the environment and the people, and the huge assured profits will go to the private promoters. There is no doubt that if built the Maheshwar Project will face the same fate as the Enron Project in Maharashtra. It will not be possible to sell Maheshwar power because it will be prohibitively expensive and yet because of the structure of compulsory payments, the MPEB or the MP government will have to pay up, and this jeopardize the already bad financial situation in the state, if not completely render them bankrupt

What is however most shocking in the press statement issued by the state government on the Maheshwar Project is the blatant way they have sought to compare the costs of power from the Maheshwar Project and that from the MPEB. The state government has compared the cost of electricity of Maheshwar power at generation point with the cost of MPEB power at supply point. The latest tariff petition of the Madhya Pradesh government to the MP Electricity Regulatory Commission shows that the cost of supply of power in M.P. is almost 2.7 times the cost of generation of power. Thus, if one were to compare the cost of Maheshwar power with the cost of MPEB power, both would have to be at the point of supply.

That would mean Rs. 10 per unit for Maheshwar power (at the cost of Rs. 3.67 per unit stated by the MPEB in the year 2005-2006) as compared to a cost of supply of MPEB power at Rs. 4.25 per unit in the same year. It is thus amply clear that MPEB power will be much cheaper than S.Kumar's Maheshwar power, now and in the long term. It is unacceptable that the state government should resort to such unacceptable ruses such as comparing the cost of MPEB power at the point of supply with the cost of Maheshwar power at the point of generation in order to falsely prove the latter cheaper. The government must explain what its interest could be in thus falsely privileging the private producers the S.Kumars over the state sector electricity board ?

In keeping with the policy of the private promoters of minimizing and trivializing the costs that would need to be paid for this Project, the state government has also given factually wrong figures for the extent of submergence and the population to be affected. It states in its recent press statement that not 61 villages but 13 and 9 villages will be partially or fully submerged by this Project, and that only 2265 families will be affected in all. However, the fact remains that the MPEB booklet of January 1998 details 61 villages where lands and /or homes of people will be submerged in all, 25 in the Maheshwar tehsil, 11 in the Kasrawad tehsil and 23 in the Barwah Tehsil of the Khargone district and 2 villages in Khandwa district all adding upto 61 villages . This booklet also states that 4000 families including those of adult sons will be affected in all.

However, the May 2001 clearance of the Central Ministry of Environment and Forests states that in 1993 it was estimated that 6227 families would be losing their homes, lands and livelihoods in the Project and who would be requiring relocation or rehabilitation. But now it is estimated that this figure has gone upto 8000. 8000 families would mean a population of at least 40,000 people excluding the 15,000-20,000 Kewats, Kahars and Dalits who have not been included in the lists at all. Thus it is very clear that over 50,000 people of 61 villages would be impacted by the Project and the intentions of the government in minimizing this seems malafide.

Despite the claims of the government that rehabilitation is progressing satisfactorily, the fact remains that not a single affected person has been either been shown or rehabilitated with agricultural land till date, although hundreds of affected persons have asked the government to demonstrate availability of land in the last five years. The report of the Task Force constituted by the state government in 1998, the report of the Central Ministry of Environment made available in 1999 and the German Development Ministry Report of 2000, all concur that there is neither cultivable land nor plan for the rehabilitation of the oustees.

The silence of the state government on why it is continuing to support and jeopardize public money by guaranteeing the bonds of the private promoters- the S.Kumars who have outstanding dues of crores of rupees on the NVDA and the MPEB as noted by the CAG, who have first received under irregular conditions and then willfully defaulted on crores of rupees to yet another state government agency the MP State Industrial Development Corporation Limited, and who have diverted Rs. 106.4 crores from public money slated for the Maheshwar project to other uses as reported in an IFCI document, is deafening. It speaks more than words would.

The NBA condemns the anti-people action of the state government in attempting to cover up the financial irregularities and the social and technical flaws of this Project and calls on the state government to promote the interests of the people of Madhya Pradesh rather than of a single private promoter, to immediately withdraw the in-principle guarantee given for bonds worth Rs. 330 crores to be issued by the Project promoters and to scrap the Project in public interest. It demands that the state government should punish the officials involved in financial irregularities and recall the public money already given to the promoter companies.

Mangat Verma
Alok Agarwal