A BOOM failing is no good news

In power deficit J&K, successive governments have made good decisions and bad decisions leaving it to successors to make corrections. NC government initiated the Baglihar but transferred seven projects to NHPC. PDP government did a reappraisal of the Sawlakote but failed to add even a single MW. Congress government sabotaged the Sawlakote deal but initiated the process of a JV company with NHPC. Now NC is working to get Sawlakote back on rails but is contemplating discarding the JV for apparently no logical reasons, says R S Gull.

Kashmir is Hydroeletricity rich state.
The JV would offer 13 percent of its generation to J&K as royalty.

Barely 2273 MWs of J&K’s hydropower potential pegged at 14275 MW stands tapped right now. Most of it – 1560 MWs – has been harnessed by the centrally owned NHPC and the remaining 713 MWs is what J&K government has installed over the years. From the NHPC, the state gets 12 percent of generation as royalty and for the rest J&K is as good a client as Punjab or Rajasthan is.

For many years now, planners in J&K have been seeking increase in royalty for new projects (right now seven projects are with NHPC for implementation) but there has been no positive response. This is despite that many power producers in the mainland offer almost one-third of the generation as royalty to state governments.

In June 2007, planners in India’s energy sector and J&K evolved the idea of a joint venture company. After a series of brainstorming they said three Chenab basin projects – – 600-MW Kiru, 1000-MW Pakal Dul and 520-MW Kawar – with a cumulative investment of over Rs. 12,720 crore – would be taken up by the JV – tentatively named Chenab Valley Power Projects (CVPP) – on BOOM (build, own, operate and maintain) basis.

NHPC has prepared DPRs of all the three projects. In fact, it has spent Rs. 68.47 crores on Pakal Dul (also called Drangdhuran) so far. Envisaging construction of a concrete face rock-fill dam of 167 meter high across river Marusudar at village Drangdhuran and an underground Powerhouse of 1000 MW (4 units of 250 MW each) in Trimuli village, projects Techno Economic Appraisal stands accord by CEA and environmental clearance by the ministry of forests in February last. It is awaiting response to the draft PIB that stands submitted to the power ministry in 2006. State government has already ordered diversion of forest land measuring 888.3173 hectares. Of the three projects, this is only one that falls under the Prime Minister’s Reconstruction Plan for J&K and would cost Rs.5577.09 crore including IDC of Rs.585.85 crore at July 2005 rice level.

All the three projects have almost identical design envisaging rock-filled dams, underground power houses and tunnels. The bus bar per unit generation cost in case of Kwar is expected to be Rs. 2.41, in case of Kiru Rs. 1.41 and Rs. 3.19 for Pakal Dul, according to NHPC DPRs at the 2006 price level. “We hope the projects do not face problems under the restrictions imposed by the Indus Water Treaty”, a former engineer who was associated with the survey part of the projects said. Unlike Pakal Dul, Keru and Kwar are yet to be cleared by the Permanent Indus Commission.

Apart from jobs, state planners thought the JV would help in elevating the status of state’s Power Development Corporation after inking the deal with NHPC(an A+++ company), get Pakal Dul back to the state (it was given to NHPC by NC in earlier term), lead to technology upgrade and finally get a bit of the money to the state that Prime Minister Dr Manmohan Singh gave to NHPC (66.85 percent of over Rs. 30,000 crores) under PMRP.

It triggered a chain reaction. Initially it was the equity participation that led to a mess because a 50:50 partnership between NHPC and PDC would get it under the central PSU norms thus negating the possibility of accommodating maximum locals in all category jobs. 51:49 was not suitable to J&K, both politically and economically. At one point of time J&K Bank was asked informally to get ready to pick up two percents leaving the two major partners as equals with 49 percent each. It did not suit New Delhi on the grounds that the bank is 53 percent owned by state government and eventually it will make PDC over 50 percent owner.

Finally Power Trading Corporation picked up the two percent and finally an MoU was signed on October 10, 2008 at Baglihar. A follow up function for signing a formal agreement was cancelled because of adverse media coverage, insiders said.

As per the MoU, the JV to be registered at Jammu would have the flexibility of being a private sector enterprise in managing its affairs professionally despite being promoted by two PSUs. Its chairman and Joint MD would be from PDC and MD from NHPC. Financial closure (the projects would require 12720 crores) would be on basis on thirty percent equity and balance debt with state owned J&K Bank going to be the most preferred bank. Partners will have to pay their share of the equity. There is no bar on the land that state government would offer becoming part of its equity.

The JV would offer 13 percent of its generation to J&K as royalty. Of the balance generation it will get 47 percent on the rate to be decided by the

and for the remaining energy it will have the first right to refuse – it can get that at market rate as well. By and large 66 percent of the energy would come to J&K only. The state retained the transmission part of the company outside the MoU thinking that it would fetch it another purpose to have a separate utility with least investment and huge incomes.

Interestingly, the first prick in the JV balloon came from PDP. This led the then power minister in Delhi Jairam Ramesh to write a detailed letter to Mufti Sayeed explaining the initiative. Then, NC stated they would go ahead with the deal if they come to power. Now, insiders in the government said, NC may review the deal again. Barring a few reports appearing in some newspapers, there is no logic for derailing the initiative. But insiders said they may have to renegotiate a clause that offers a buy-back option to NHPC. “Instead of not more than 49 percent (as written in the MoU) for PDC, there should be no less than 49 percent and if one partner has the option of buying out another the option must be available with another partner as well”, one policy maker said.



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