Narmada Solidarity Forum Press Release

June 6, 2001

Narmada Solidarity Forum
122/4, Infantry Road,
Bangalore 560 001

Another Enron in the making

BHEL heading towards disaster with their proposed investments in the Maheshwar Hydro-electric Project in Madhya Pradesh

The Bharat Heavy Electricals Limited (BHEL) and Financial Institutions (FI) like IDBI, UTI, Dena Bank, SBI, Bank of India, LIC, GIC and the IFCI are being warned against investing in the controversial Maheshwar Hydroelectric Project on the Narmada River. BHEL is heading towards disaster with its proposed 49% Capital Investment and also the supply of expensive turbines for the project. After finding this project to be financially unviable as well as socially and ecologically destructive, as many as 7 MNCís have pulled out. Being the first privatised project of its kind in India, the Maheshwar Dam is being built at a cost of Rs. 2254 crores by S Kumarís, a textile magnate which has a notorious track record with regard to workers and has no experience in this area. It is surprising that at a time when the nation was calling for a judicial investigation of the Enron agreements, the FIs should seek to fund yet another such project in Madhya Pradesh.

The situation: The Maheshwar Dam is one of the large dams being built on the Narmada River, which is destroying the entire river valley. It is a project with an installed capacity of 400MW but it will have an average firm power production of only 82 MW. In fact, for 8 months of the year, when the peaking requirement is the highest, the project will not yield more than a daily average of 1 - 1.5 hours of power (figures based on data in the Detailed Project report). The current cost of electricity being produced by the Madhya Pradesh Electricity Board is Rs.1.25 per unit. The proposed cost of power will be Rs.6.52 per unit as levelised tariff for the next 35 years and Rs.9.65 per kWh as the cost of peaking power. Successive financial investigations by the CRISIL in June 1998 and Oct 1999, as well as the very recent Shivraman Committee report confirm that Madhya Pradesh has no escrow-able capacity at all, that it is in default on other bonds and leases and that it is now in fact bankrupt and hence cannot pay for this power even for a year, let alone the next 35 years. With 80% of the electricity being produced in the monsoon months when it in not needed, the supposed beneficiaries - farmers, weavers, and even small industries will perish due to the high cost of electricity during the rest of the year.

Of more immediate consequence is the adverse impact on the lands and the livelihoods of over 40,000 people in 61 well to do villages due to submergence by the waters of the Maheshwar dam. It will also irreversibly inundate hundreds of acres of fertile, irrigated, deep, black cotton soils, scores of extremely productive, cooperatively run sand quarries, hundreds of acres of river draw- down land, and rich fisheries. Along with damage to the culture and way of life of the people affected, it will submerge many historical monuments and temples, and old, pre- historic sites. In addition, it will cause severe water logging in the adjacent lands over an area at least double that of the area of actual submergence.

The Struggle and its consequences: The people affected have organised themselves collectively under the Narmada Bachao Andolan to fight this destruction in the name of development. Their struggle had earlier forced the World Bank to withdraw from the Sardar Sarovar Project and also got a stay order from the Supreme Court for a period of four years.

In case of the Maheshwar Project, the struggle has forced the authorities and others to reassess the project as well its impacts. Since then, Successive investigations into the displacement and rehabilitation of the affected people by the Task Force Committee set up by the Madhya Pradesh government in 1998, the investigation team of the Central Ministry of Environment in 1999 and the team of independent experts commissioned by the Development Ministry of the German government in 2000 have all indicted the project for the complete lack of agricultural land to be provided to the oustees and any possibility for the restoration of livelihoods.

As a result, after finding the project socially destructive and financially unviable American companies like Ogden, PacGen and Harza; German companies Bayenwerk, VEW Energie and Siemens have withdrawn from the project. The governments of Germany and Portugal cancelled the export guarantee for the Maheshwar Project.

Protests in Bombay: The activists from the Narmada Bachao Andolan have on the 31st May and 1st June protested against the different FI's and got their officials to rethink their involvement in the Maheshwar Project.The Narmada Bachao Andolan also called on the Reserve Bank of India to regulate these illegal practices of the FI's that are designed to convert thousands of crores of public money into non-performing assets. The Narmada Bachao Andolan notes the role of the financial institutions in backing the disastrous Enron project, destroying the energy and production economy of the state of Maharashtra and jeopardizing nearly Rs.6000 crores of public money in the Enron project. The Andolan decries the complicity and collusion displayed by the financial institutions in backing "Greenfield" projects promoted by private promoters and the failure of the appraisal and audit processes.

BHEL and others being trapped: The project being forsaken by all other foreign companies, FIs and now - the BHEL, a public sector unit accountable to the Indian people and more so to its employees, is being forced into a trap by the corrupt political leadership. It may also be noted that the guarantee of payments for this Project (escrow clause) had been predicated on the availability of revenue from four revenue allocation centres in Madhya Pradesh, namely the Ratlam,Mandsaur,Bilaspur and Ambikapur centres. The bulk of the revenue was to come from the last two centres. However with the recent bifurcation of the Madhya Pradesh state, the two high revenue yielding centres of Bilaspur and Ambikapur have gone out of Madhya Pradesh. Thus, the ability of Madhya Pradesh to pay for Maheshwar power has become severely limited making the escrow guarantee itself worthless. The recent Shivraman Committee report on the financial situation of the MPEB has concluded that after the bifurcation of Madhya Pradesh in to MP and Chattisgarh, the M.P. Electricity Board has no escrow-able capacity at all!

In the wake of Enron controversy it has been very clear that the construction and public financing of high cost IPPs is unsustainable and leads to enormous damage to the energy and production economy of the state and the nation. We call on all decision makers of BHEL to take cognizance of the above and desist from either participating in the equity of the project or from supplying instruments. We warn BHEL and the people of this country that if BHEL proceeds to invest in this project it will be a step towards bankruptcy and severe economic loss, much like what IDBI and other FIs are facing in the Enron Project today.

We are also aware that at various levels of government, privatization of BHEL, one of the most efficient and competent public units of the country, is planned. Recently, Union Minister Sunderlal Patwa announced in Bhopal that privatization of BHEL was on the cards. Given the above situation, it is clear that BHEL is heading towards enormous losses, a future Enron in the making... only that unlike Enron, BHEL will have no counter guarantees and hence no protection. These guaranteed losses makes BHEL ripe for disinvestment!

This conspiracy needs to be fought tooth and nail if BHELís future is to remain secure to prevent its employees from being thrown on to the streets.

This effort at privatizing the power generation sector is not isolated. In the context of the above mentioned details regarding the Maheswar project, and the situation of the Enron power project it is imperative that all such projects which include the Cogentrix and Thanirubhavi power projects in Karnataka with private investment should be scrapped.

PROTEST DEMONSTRATION AT BHEL MAIN GATE, MYSORE ROAD, BANGALORE AT 4:00 PM ON 6TH JUNE, 2001.

More than 200 people gathered outside the B.H.E.L. factory gates on Mysore Road this afternoon, to protest against BHELís proposed plans to supply turbines, and claim a 49% equity share in the controversial Maheshwar hydro-electric project on the river Narmada in Madhya Pradesh. Holding colorful masks and posters, singing songs and shouting slogans, the protestors from different social groups, distributed leaflets to the BHEL workers at the Factory Gate. The leaflet warned BHEL that the Maheswar dam had been proven financially unviable, socially and environmentally catastrophic.

The protestors who came together as the Namada Solidarity Forum consisted of representatives from dalit groups, environmental groups, trade unions, domestic workers, human rights groups, Womenís groups, students, and individual from many walks of life.

A delegation of the representatives from Narmada Bachao Andolan and Narmada Solidarity Forum met Mr. Ashok Puri, Executive Director-BHEL. It included Alok Agarwal of NBA, Jagdish Bai a project affected person, Leo Saldanha of Environmental Support Group, Nilanjana Biswas and Elavarthi Manohar of Narmada Solidarity Forum. At the outset, Mr. Puri expressed appreciation over the fact that the delegation had taken the trouble to apprise him of the facts behind the Maheshwar Power Project.

Mr. Puri expressed grave concern that BHELís involvement would be restricted to low-income heavy manufacturing activities, with complete disregard for its technological expertise. He was also shocked to hear that the cost of power generated by the Maheswar project would be Rs.6.50/- per unit. He took serious note of the issues raised by the delegation and promised to convey these to the corporate decision body at the central level.

L C Jain, former member of Planning Commission of India, Ex vice-chairman of World Commission on Dams (WCD)
Alok Agarwal, Narmada Bachao Andolan (NBA)
Leo Saldanha, Environment Support Group (ESG)
Alternative Law Forum,
Dalitha Mahila Chaluvali,
Janadvani Yuva Vedike,
Karnataka Domestic Workers Movement,
Karnataka Vimochana Ranga, Manasa,
Meljol,
Navodini,
Nisarga Srushti,
National Alliance of Peoples' Movements - Karnataka,
Pedestrian Pictures,
Peoples' Democratic Forum,
Peoples Union of Civil Liberties Karnataka,
Sabrang,
Samvada,
Sangama,
Student Christian Movement of India,
Vimochana,
Visthar,
United Theological College
and other supporting groups and individuals
(For Narmada Solidarity Forum)


Contact Phone Numbers for Narmada Solidarity Forum:
286 5757 (Chitra), 2223761 (Sonia), 5587493 (Usha/Benson), 5359591 (Manohar)