NBA Press Release
  18 November 2001
Save The Narmada, Save Humanity!

New CAG Report tabled in Madhya Pradesh Vidhan Sabha confirms S.Kumars financial malpractices; M.P. government must desist from picking up equity in the destructive Maheshwar Project

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In new additions to the mounting track record of grave financial irregularities being practised by the S.Kumars group in their various Project workings, the report of the Comptroller and Auditor General of India (CAG) that was tabled in the M.P. Vidhan Sabha last month, has brought to light some fresh financial malpractices of the S.Kumars. The Report of the Comptroller and Auditor General of India for the year ended 31 March 2000 (Govt. of Madhya Pradesh, No.2 of 2000, Commercial) has pointed out that the S.Kumars have not even paid the Madhya State Electricity Board the money that is owed to them, since the Maheshwar Project was privatized and transferred to the SMHPCL. In the words of the CAG Report - " Maheshwar HEPS and Pench TPS were sold to private parties in November 1992 and July 1994 respectively for a value of Rs. 86.11 crores. Till date amount has not been realized." Further, the CAG report for the year ended 31 March, 2000 has pointed out that the MPSIDC gave a loan to the S.Kumars company - the Induj Enertech Ltd. "in contravention of the powers of the Board as it exceeded Rs.3.00 crore " and which was "without prior approval from the state government."

It may be noted this consistent tendency of the S.Kumars to dishonor and default on public money that was borrowed by the S. Kumars from various state government agencies had been exposed earlier when the MPSIDC - the Madhya Pradesh State Industrial Development Corporation Ltd. had issued a public notice in the Economic Times of 13th September,2001. that states that

"Induj Enertech Limited Mumbai, (Maharashtra) (Formerly S.Kumars Power Corporation Ltd.) And M/s Modak Rubber Textile Industry Pvt.Ltd. Mumbai, (Maharashtra) companies of the S.Kumars group are willful defaulter in repayment of overdue principal and interest more than RS.11.08 crores towards financial assistance given by us on promise of prompt and timely payment . Despite several intimation, lots of opportunities and demand notices given to them ,the aforementioned Companies have not bothered to pay or respond. Hence the MPSIDC is contemplating LEGAL ACTION against the Promoters, Directors, Guarantors and the Companies. The LEGAL ACTION shall include petition for winding up of the said companies and other appropriate measures."

The new CAG report has added fresh light on this loan taken by the S.Kumars from the Madhya Pradesh State Industrial Development Corporation Ltd. for its group company -the Induj Enertech Ltd. by pointing put that the circumstances and terms of the lending of Rs. 8.02 crores to Induj Enertech that subsequently became Rs. 11.08 crores with interest , was irregular in the first place. In fact, the CAG report notes that the MPSIDC was not authorized to give the S.Kumars or any other company a loan beyond the limit of Rs. 3 crores. However, "in contravention of the powers of the Board", the MPSIDC extended a loan of nearly 3 times the allowable limit to the S.Kumars group company - the Induj Enertech Ltd. It may be noted that the Shree Maheshwar Hydel Power Corporation Ltd. - the S.Kumars Corporation that is constructing the controversial and destructive Maheshwar Hydro-Electric Project, is a wholly owned subsidiary of the Induj Enertech Ltd.

It is thus amply clear that the S.Kumars first obtained a loan from the Madhya Pradesh state agency - the MPSIDC in contravention of the legal limits, and then they proceeded to default on the loan, to the point that the MPSIDC had to declare them as "wilful defaulters" and had to announce that would institute a winding up petition against them.

Similarly, it is also clear that the S.Kumars have not yet paid either the NVDA (Narmada Valley Development Authority) nor the Madhya Pradesh State Electricity Board the crores of rupees that is outstanding and that they should have paid seven years back at the time of taking over and occupying the Project site and infrastructure. It may be recalled that the Report of the Comptroller and Auditor General of India presented to the Madhya Pradesh Vidhan Sabha in 1999 had stated that the Shree Maheshwar Hydel Power Corporation Ltd. still owe the NVDA - Narmada Valley Development Authority -belonging to the Madhya Pradesh state department Rs. 10 crores and 47 lakhs that it was to pay at the time of taking over of the Project in 1993-1994. The recent report has pointed out that a larger amount is outstanding to the MPSEB as well. It is a measure of the influence and clout of the S.Kumars that they have been able to control and continue with works on the dam site and existing infrastructure, draw around Rs. 255 crores of loans from the Indian public financial institutions without even paying the state government for the transfer of the assets or holding a legal lease their name. It may be recalled that the IFCI appraisal report had stated that even out of this money, the S.Kumars have given away Rs. 106.4 crores to companies and agencies including their own group companies, which hold no approved contracts for the Project.

There is no doubt that the above-mentioned multiple defaults and irregularities have to be investigated and the truth of companies that consistently dishonor and default on loans taken with public money exposed. The Narmada Bachao Andolan has already petitioned the RBI to conduct an investigation on this issue.

The Narmada Bachao Andolan also reacts sharply to reports that not satisfied with defaulting on large outstanding payments to the NVDA, the MPEB and the MPSIDC, the S.Kumars have now asked the Madhya Pradesh government to pick up equity in the Maheshwar Hydro-Electric Project being built in the Narmada valley. It is clear that by undertaking this equity participation, the Project promoters intend not only to evade paying back the crores of rupees that they owe the Madhya Pradesh government and that the S.Kumars group has defaulted on, but further it will use the public funds of the Madhya Pradesh government to bolster and push forward the destructive Maheshwar Project. If this happens, not only will crores of rupees belonging to the people of Madhya Pradesh will be jeopardized, but also the Rs. 600 crores of compulsory payments that will have to pay to the Project promoters for the next 35 years will destroy and disrupt the entire economy of the state of Madhya Pradesh. Moreover, 50,000 to 60,000 farmers, fisherpeople and dalits who are leading prosperous lives based on agriculture in the deep black cotton soils, the scores of sand quarries and the rich fishing are at terrible risk of becoming paupers given the failure of the rehabilitation process in this Project.

The Narmada Bachao Andolan condemns this anti-people action proposed by the Madhya Pradesh government and demands that not only must equity participation by the state government not take place. Instead, the Madhya Pradesh government must investigate the role of the MPSIDC officials who were responsible for the decision to lend beyond prescribed limits, recover the outstanding dues owed to the MPSIDC, MPEB and the NVDA from the S.Kumars and must decisively scrap this unviable Project. It may be noted that the Narmada Bachao Andolan has established from detailed analysis that the cost of power from the Maheshwar Project will be around Rs. 6 per unit, which not a single consumer will be able to buy. Further, this Project does not even have a techno-economic clearance or concurrence under section 31 from the Central Electricity Authority as is required under the Electricity Supply Act, 1948. As per the Detailed Project report of this Project, only 20% of the total electricity to be produced by this Project will be produced in the eight non-monsoon months of the year when the electricity crisis exists. It is a matter of concern that despite the fact that this Project will produce very little and very expensive electricity, the State Electricity Board has executed a suicidal agreement with the S.Kumars whereby they will have to pay Rs. 600 crores per year for the next 35 years. Thus it is clear that the entire economy of Madhya Pradesh will be destroyed. The experience of the Enron Project of Maharashtra which consumed thousands of crores of public funds but is standing today like a white elephant whose electricity cannot be drawn despite power shortage in Maharashtra because of the extremely high tariffs is likely to be repeated in Madhya Pradesh at Maheshwar.

The state of Madhya Pradesh is reeling from a power deficit. However despite large surpluses of electricity available with Chattisgarh, Punjab and the NTPC that they have offered to sell, and that Madhya Pradesh can purchase in order to solve the power crisis, M.P. is either unable or unwilling to do so. The priority of investment at this point in Madhya Pradesh is not to invest in unviable and costly Projects like Maheshwar but to reduce the 47% T&D losses in the state. If only a small portion of this loss is saved and made available for use, the crisis may be resolved. However instead of recovering its dues from the S.Kumars and investing money in increasing T&D efficiency, the Madhya Pradesh government is further proposing to jeopardize public money and endanger public interest.

In response to the proposed equity participation by the state government in Maheshwar, Shri Prashant Bhushan, Supreme Court lawyer and counsel for Narmada Bachao Andolan has served legal notices to the Chief Secretary, Madhya Pradesh government Shri Mehrotra and the Principal Secretary, Energy Mr. Shankar Narayanan. The Andolan believes that investing in a Project like Maheshwar is holding public interest to ransom. If the Madhya Pradesh government decides to invest in this destructive Project, the NBA will intensify its struggle against the government and take legal action against them.

Mangat Verma
Alok Agarwal