Powerful Decisions

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Last week, J&K government’s decision-making in power sector created lot of news. But one decision envisaging non entertaining lot of doles by Delhi in lieu of transferring Greenfield projects was aimed at preventing Kashmir to go astray again, reports Masood Hussain

Apprehensive that it could trigger yet another mass unrest, J&K government has refused Delhi’s Himalayan offer in implementing four major projects totaling 4000 MWs. The rejection could have a backlash as it had come from the highest level in the government of India, informed sources said.

In order to help J&K government fast-forward implementation of four major power projects, the central government had suggested entering into Joint Ventures with various power ministry PSUs. They were actually given two options: either to transfer these projects to the already operational CVPP – a JV between SPDC, NHPC, PTC, and NTPC; or to create different JVs with various PSUs of the Ministry of Power. They were even suggested that SPDC, state’s main power generation arm can set up special purpose JVs, one each for every project.

The projects that central government is so keen to implement in partnership include 1856-MW Sawlakot, 390-MW Karthai (I), 930-MW Karthai (II) and 850-MW Rattle. All these projects are Chenab basin initiatives. For the sake of early implementation, the government had even included the three Chenab basin projects that CVPP was implementing.

The conditions attached to the offer were alluring. The government of India wanted to build these projects on BOOM basis and return them to the state government after 12-15 years. It offered managing entire corpus of Rs 65000 crore funds that are required to implement all the seven power projects. Knowing fully well, the precarious nature of public finances in the state government, Delhi knew the state is not in a position to invest even the promoters share, the proposal said the centre will release a special grant to fund Rs 20,000 crore required as 30 percent equity of the state government.

While insisting that the entire gamut of loans would come from Power Finance Corporation or the Rural Electrification Corporation, the offer said the centre will help even accessing low cost loans from World bank, IDA, JICA or KfW. Besides, there were tax exemptions to improve the economic viability of the projects. It even suggested the Government of India can make purchase of power from these projects compulsory for the states.

As the issue cropped up in a special meeting of power department, some of the participants were shocked by the slew of concessions that the central government was willing to extend to the state. For even a fraction of these concessions, the state government had spent years when the Baglihar was being implemented.

Dr Nirmal Singh, Deputy Chief Minister and state’s power minister.

While BJP and most of the state bureaucracy was so keen to grab the opportunity, the PDP and a section of officialdom said the proposal can not be accepted. Acceptance of the offer, they argued, would push Kashmir to a new phase of unrest especially because Kashmir has remained highly sensitive to the NHPC working and operations in J&K. They also said that SPDC has already inked an agreement with various power PSUs that have led to the creation of CVPP for implementation of three power projects: 1000-Mw Pakal Dul, 560-MW Kiru and 560-MW Kawar. SPDC and NHPC hold 49 percent each in the JV as the balance two percent are with NTPC and PTC. Interestingly, neither of the three power projects has even witnessed the first spade work though they have got technical and environmental clearances.

Of the four other projects the offer talked about, the only headway was on the Rattle front. This project was given on tariff based bidding to a Hyderabad company. But for reasons not known, they had fled from the site. The Sawlakot was negotiated with the Norwegian company but the Congress government in 2008, cancelled it. This led to litigation and the company won the case. But there has not been any progress.

The impression in Srinagar is that NHPC has exploited J&K’s water resources. Right now NHPC owns seven projects in J&K totaling 2009-MW.  It offers J&K only 12 percent of royalty and one percent generation for local development. NHPCs last project is in Gurez, the 330-MW Kishanganga which is getting into commercial generation early next year. With no work now in state, other than running what it already has, NHPC is planning another nit for Uri and another stage for Dul Hasti in J&K. It is not known if the state government is also on the same page.

That was not the only “powerful” decision last week. The cabinet finally approved the cabinet sub committee recommendation on New Ganderbal power Project. Finally, it is official that the power project that will be set up closer to the old Ganderbal project will be implemented by the Hindustan Construction Corporation (HCC). Bad media and certain vested interest had created a Himalayan controversy over the pricing of the project. It was cleared in the last Cabinet Sub Committee that Deputy Chief Minister headed.

An aerial view of Ganderbal Power Project, the second oldest in Kashmir. KL image: Yasir Nowshehri

However, a major decision eluded this cabinet meeting. It was supposed to waive off various duties and charges on the upcoming power projects that had made them completely unviable. The concession is expected to cover all the upcoming projects regardless of who is implementing them. Off all the charges, Water Usage Charge is the major crisis confronting these projects.

Water usage charges being levied by the SWRRA has run riot with the power sector in the state. While NHPC has managed to survive the exploitative tax, done by the Congress to address the anti-NHPC narrative, it was the SPDC that took the serious hit on account of this charge. Even though the Baglihar-II is into generations for almost two years now, it has not been able to sell the power because the water usage charge has made it completely unviable.

“Tariff of under construction 48 MW Lower Kalani and 37.5 MW Parnai is turning non-attractive and shall also not be marketable in case the low tariff regime continues,” a member of SPDC Professionals Association said. “Levellised tariff of upcoming projects like 93-MW New Ganderbal, 1856 MW Sawalakot, 930 MW Karthai is also coming far higher than the current market price regime, affecting the viability of these projects.”

Hydropower is costly these days because solar power and wind power is available in the market. Right now the solar power tariff is around Rs 2.44 per unit and the wind power is Rs 3.47. Both these sources of energy are cheap compared to the hydropower. No project of SPDC is expected to produce energy at a tariff below Rs 5.90 per unit so there is a serious crisis in managing power purchase agreements (PPA).

Given the doom the water usage charge enforced on SPDC, the government finally is contemplating to give a concession to the projects. It was the crisis of Baglihar-II that led the policy makers to mooted the idea.

Interestingly, the state cabinet has already granted the concession to the CVPP owned Pakal Dul for a decade from paying the Water Usage charge, free power WCT/ET and free power for a period of ten years. Many people in SPDC were shocked to see the order of concession issued in June 2014 because Pakal Dul got the concession when the first brick is yet to be laid and Baglihar was generating power and it was not getting any relief so that it could sell the energy and pay the debts.

J&K is a water abundant and energy deficit state but its crisis is rooted in its lack of foresight. Now when it is trying to fast forward some of projects, it is facing serious crisis as competition is up. In the new price wars, none of the SPDC projects is viable. This is now forcing the state government to reduce various duties so that these projects become viable.

Officials said this concession will take some time to get formalized. “It was supposed to be cleared by the cabinet this week but some last minute hitches delayed it a bit,” one insider said.

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