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A Report by
Heffa Schücking
March 1999


From November 30 through December 17, 1998 Heffa Schücking of the German non-governmental organization Urgewald investigated the Maheshwar dam project on the Narmada River in the State of Madhya Pradesh. Urgewald is an environment and development NGO that monitors German involvement in large-scale projects with significant social or environmental impacts in developing countries.

1. Project history

The Maheshwar Dam is part of the controversial Narmada Valley Development Project that entails the construction of 30 large and 135 medium-sized dams in the Narmada Valley. Maheshwar is one of the planned large dams and is slated to provide 400 Megawatts in energy. The project has been planned since 1978 and was originally under the auspices of the Narmada Valley Development Authority. In 1989 the responsibility for Maheshwar was conferred on the Madhya Pradesh Electricity Board (MPEB), a parastatal company. Subsequently in 1993, the concession for the Maheshwar Project was awarded to the S. Kumars company. In 1994, the project received a conditional environmental clearance from the Central Ministry of Environment and forests (MoEF). In 1998, preliminary contracts were signed with the German power utilities Bayernwerk AG and Vereinigte Elektrizitätswerke Westfalen (VEW) for participation in the Shree Maheshwar Hydro Power Corporation. Maheshwar is the first privately financed hydroelectric dam in India.

2. German Involvement in Maheshwar

Sixtysix percent of the capital for the Maheshwar Project is slated to come from Germany. The German utilities Bayernwerk and VEW plan to each acquire 24.5% equity in the Shree Maheshwar Hydro Power Corporation (SMHPC). On a short-term basis, the German company Siemens will contribute an additional 17% of the equity in return for the contract to provide turbines and generators for the project. Siemens is a non-voting shareholder; its shares will be administered by the S. Kumars company, which controls 51% of the voting rights in the SMHPC. The total project costs equal US $530 million of which US $257 million will be provided by the German Bayerische Vereinsbank (now called HypoVereinsbank) in form of an export loan. In order to protect their long-term investment, the utilities Bayernwerk and VEW have applied to the German Government for an investment guarantee. Siemens has applied to the German Government for an export credit guarantee (Hermes guarantee). In 1997 the German Government made an in-principle decision to approve a Hermes guarantee for Maheshwar, but subsequently the final decision on the export credit guarantee as well as the investment guarantee has been put on hold due to the problems surrounding the project.

3. The Project Area

Maheshwar is to be built in the Nimad region of Madhya Pradesh, two kilometers upstream from the town of Mandleshwar. According to official data, 61 villages will be affected by the project. 21 of these villages would be totally or partially submerged, while in the remaining 40 villages only agricultural land would be submerged. The agricultural soils here are extremely fertile and irrigated agriculture forms the mainstay of the economy in the project region. As the farmer, Badrilal, from village Jalud says: "Whatever can grow in the world, can grow on our soils". Some 90% of the agricultural lands are irrigated, mostly through lift irrigation from the river. Thus, farmers from the region are able to grow 3 crops a year, including different sorts of grain, soya, pulses, peanuts, chilies, spices, bananas, guavas, citrus fruits, sugar cane, cotton and many different vegetables. In addition, villages in the area possess large herds of buffalo, cattle and goats. For rural India, the project area is extremely prosperous. Aside from meeting the villagers own needs, agricultural production from this area supplies regional markets with grain, rice, sorghum, melons, buffalo milk and many other goods. The region exports cotton to international markets including Switzerland and Germany. Its agriculture sustains not only a large part of the population in the 61 villages, but is also an important employer for wage labourers living outside of the project area. The villages alongside the Narmada show a highly differentiated social structure that has evolved around different economic usages of the river. Alongside small farmers, one finds a diversity of occupational groups such as the Kahars (Fisherfolk) and Kevats (Boatsmen), people living from sand-mining and draw-down agriculture (seasonal agriculture on the river banks) whose livelihoods all depend on the river. In addition, there are many occupations in the craft and service sector such as carpenters, smiths, tailors, shopkeepers, drivers etc. whose livelihoods depend on the overall prosperity of the villages. The village Mardana shows a typical occupational distribution for the area. 70% of its inhabitants are farmers, 10 % are landless labourers, 10 % fisherpeople and 10% are divided among various craft and service professions. The Narmada River is the centerpiece of the economy of these villages. Accordingly the villagers show her reverence as "Mother" and "Nourisher". Their way of life is both economically and ecologically sustainable and has brought a high degree of prosperity to their communities. The villages have access to electricity. Many families own telephon and television; some even have tractors, motorcycles and other vehicles. In addition, there is a relatively highly developed infrastructure (schools, health station, community halls etc.). As a consequence, there is almost no migration to urban areas from the project region.

To part II

For more information, contact:

  • Urgewald e.V.
    Von-Galen-Strasse 4
    D-48336 Sassenberg
    Fon: +49 (0)2583 1031
    Fax: +49 (0)2583 4220
  • Patrick McCully
    International Rivers Network
    Tel: 1 510 848 1155 ext. 317

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