A Marathon Struggle

Once termed to be the ‘juggler vein of Kashmir’, Baghlihar symbolizes an achievement that has laid a strong foundation for the state’s future forays into the energy sector. For a water-abundant state living in energy misery for decades, creating a 450 MW powerhouse was a painful struggle and an unparalleled experience. R S Gull reports the project that will help manage J&K’s energy deficit.

The project generated energy in 2009-10 worth Rs 1082.62 crore which appreciated to Rs 1114.79 crore in 2010-11.
The project generated energy in 2009-10 worth Rs 1082.62 crore which appreciated to Rs 1114.79 crore in 2010-11. Pics: Bilal Bahadur

Even commoners in Chandrakote claim a change. For most of the year, they say, they need quilts because the place is comparatively cool. “We do not feel so hot now,” said a shopkeeper outside the PDC guest house. “The dam seems to be keeping the area cool.”

It is exactly the same solace that J&K government is drawing out of 450 MW Baglihar powerhouse, the flagship asset of the Power Development Corporation. By average it is generating more than 2800 million units of energy in a year that values more than Rs 1000 crore. While half of it goes for debt servicing, the rest is consumed by J&K.

From the highway, only two things are visible – water gushing out from the dam located deep into the mountains and the gate to the project that passes through the township that JP Associates – the civil contractor who implemented the project, has set up. The project lies deep into the mountains and has a maze of tunnels that are impossible to navigate without a guide. The only visible thing is the dam that rises from a gorge to a frightening height of 143 meters with nine spillways – five main spillways, three chute spillways and one auxiliary spillway.

It has an overall storage capacity of 428.28 million cubic meters and 2.8 million cubic meters of concrete was used to set it up. Fitted with two heavy-duty 150-ton Electrical Overhead Travelling (EOT) cranes to clear the water body from timber logs washing down the river, the dam – navigated only by boats, has fully automatic systems offering every change in the water level. It has impacted more than 80 km of road length between Baglihar and Prem Nagar in Doda, part of which was re-laid.

A 10.15 by 2179 meters long tunnel drains water from the dam and drops from a 90-degree angle with 123-meter head to run three sophisticated turbines. The powerhouse is modern and sophisticated. Housed underground, the five-story powerhouse is a calm spot where machines offer every bit of operation from the dam, tunnel and the turbines. It is just a computer and a sleek LCD monitor that is required to control the behemoth that took Rs 5827 crore and so many years to build.

“For most of the winter, only one unit runs round the clock and two at peak hours because there is not much of the discharge available,” a young engineer who is posted on the project for last many years said. “But in summers as the levels appreciate, all the three units are in operation round the clock and they run to full capacity.” At peak summers, lot of water actually flushes out of the dam unused.

The Dam: Excess water flowing down the baglihar dam.
The Dam: Excess water flowing down the Baglihar dam.

The project was identified during the later years of Rajiv Gandhi regime and was almost immediately transferred to NHPC. Unable to cope with the inordinate delay the project was taken back by the state government even after NHPC had spent around Rs 23 crore on some pre-construction jobs, records reveal.

After an elected government replaced the prolonged spell of the gubernatorial regime in late 1996, a consortium was identified for its implementation. On November 14, 1997, an MoU was signed for its execution on turnkey basis with M/S JP Industries for the civil works and M/S SNC Lalivin for technical part totalling the US $ 600 million. The state had to offer 15 per cent equity as the rest would be arranged by the consortium as offshore low-cost credit. This all was conditional to the counter-guarantees.

Though the MoU was re-signed on June 30, 1998, counter-guarantee never came. Finally, the state decided to execute the project on its own. A contract was signed with the consortium led by M/S JP Industries. However, Siemen, Hydro Vevey Ltd, Elexthom and others had replaced some of the firms who were part of the earlier consortium. A formal agreement was inked on April 10, 1999, under which the state government was to pay 30% of the project cost as the equity and the balance would be market debt.

On EPC (Engineering Procurement and Construction) basis, Baglihar contract was given to Jaiprakash Associates Ltd for civil and hydro-mechanical works as Voith Siemens NA Tech executed the electromechanical part. German company Lahmeyer International GmbH is the consultant for the PDC.

Baglihar: A View From Control Room

Watching the giant Francis turbines running, officials associated with the project from its start see its completion as ‘not less than a miracle’. That was because the project implementation carried out during the reign of three different political governments, witnessed serious challenges from three different fronts – the finance market, Pakistan and the weather. Weather conditions triggered time and cost overruns and made the energy costly.

Funds were the basic problem. Soon after the agreement was signed, the state government had to pay Rs 162 crore for mobilization and it had nothing much in its kitty. So a Rs 100 crore special loan from the J&K Bank saved the face and the situation!

As the work progressed (it commenced from April 10, 1999), the state government would resort to different systems to fund the show. At one point in time, it diverted around Rs 600 crore from the state’s yearly development plan. The second option was to float, short-term, high cost, five series of bonds to fund its equity. These private placement secured, redeemable and medium-term bonds guaranteed for interest and principal payments with some of them falling under put and call category totalled Rs 1053 crore. (Most of it is liquidated.)

CM-inspecting-Tunnel-of-IInd-Phase-of-Baglihar-HE-Power-Project-4[1]

As the going got tough, the state government finally sought formal help from the central government and the Prime Minister offered a grant of Rs 630 crore of which 10 per cent was the loan component. Later, when the costs spiralled up because of the collapse of tunnels, the central government did extend a temporary interest-free loan of Rs 670 crore that was deducted from the central devolutions to the state, the next year.

Usually what happens in the huge capital intensive project is that once the DPR is ready and the contracts are allotted, financial closures take place. But that did not happen in Baglihar because most of the financial institutions were initially not interested. At one point of time, they came up with conditions which were unacceptable to the state government because that had never happened in any of the Indian states. FIs wanted to create a lean on the Consolidated Fund of the state meaning J&K’s entire expenditures including the salary of the governor was to be kept hostage. They also wanted direct access to state’s devolutions from the central government and an undertaking that the state government will not take up any other project unless the Baglihar is debt-free!

However, the mindset witnessed a change after the Baglihar started growing up in the gorges. Initially, Indian Banking Association extended some help and later when almost half of the project was ready, financial closure of the project took place in 2005. It was a Power Finance Corporation led consortium that pledged a debt of Rs 2253 crore. It included Rs 845 crore from PFC, Rs 565 crore from REC, Rs 360 crore from J&K Bank, R 300 crore from HUDCO, Rs 73 crore each from Canara Bank and Union Bank of India and R 37 crore from Central bank of India. The financial closure had refused funding anything more in case of any cost escalation and that happened eventually. State government did arranged additional funds after tunnel collapse pushed costs up.

Baglihar dam: A view from outside

Baglihar cost J&K PDC Rs 5827 crore included Rs 150 crore for works falling under Stage-II and Rs 129 crore for the 215-tower, 67.93 km long 400 kv double-circuit Baglihar-Kishanpur transmission line that KEC set up. Since the state government has repaid most of the bond debts, the net debt liability of PDC on Baglihar at the time it went into generation was Rs 2253 crore. After repayments in the last few years, the debt liability stands reduced to Rs 1668 crore (May 2012). It is expected to be debt-free in 2019.

The Indus Water Treaty played its own role. Pakistan objected to the project – as it historically had done on other projects, insisting that the dam would lessen the discharge to its plains. The Indus basin is fundamental to Pakistan’s water requirements. As the final round of talks failed in January 2005, Islamabad decided to approach the World Bank – the official arbitrator of the water haring treaty. Finally, a Swiss civil engineer Professor Raymond Lafitte who teaches at the Swiss Federal Institute of Technology in Lausanne was appointed by WB as an arbitrator on May 25, 2005.

Pakistan had raised three issues with the NE – questioning the power project’s “irrational and unrealistic” design, terming dam pondage to be double than permitted by the Treaty and asserting the intake channel to powerhouse did not fall within Treaty specifications.

Neutral Expert pronounced his verdict on February 12, 2008. It has six ‘determinations’, favoring three each to either side. NE upheld India’s position on three issues – the design flood of Chenab at 16500 cubic meters per second, permitted a gated spillway and termed it necessary and finally upholding the sedimentation management mechanism of the dam design.

The major recommendation was to raise the power intake by three meters from the level of 818 meters to 821 meters. Other two awards that upheld Pakistan stand include reducing the dam freeboard by 1.5 meters and lowering the pondage of the dam from existing 37.722 million cubic meters to 32.56 mcms. Pakistani officials visited the site and returned satisfied over the implementation of the NE awards.

In order to prevent the two countries losing face, the NE – the first on earth who interpreted the Treaty for the first time it was signed in 1960, asked both the sides to share the costs of arbitration.

Baglihar Looks Like A Vast Industrial Estate

As diplomacy was at work in Switzerland, it was geography making things uncomfortable at Chenderkote. In July 2005, Chenab roaring phenomenally as soaring temperatures added massively to the glacial meltdown and washed away 105-meters long steel bridge, the most crucial infrastructure near the dam site, besides inundating three other bridges including a footbridge.

For any dam, diversion tunnels (DTs) are the first requirement for diverting the water flow and work on the main river bed. Once the dam is ready, these tunnels are blocked. Baglihar had two DTs of 1500 cumecs each. As excessive discharge brought in around one lakh cubic meters of mud, it chocked the mouth of one of these channels. The river was so ferocious that men and machinery had to be evacuated.

As the engineers and the contractors were discussing the way out, the weather improved and water level receded from 765 meters above sea level (masl) to 750 masl by the middle of August. It triggered massive landslides in the area and one major slide blocked another DT. With both the tunnels designed to cater to discharge up to 5500 cusecs at 808 masl or 3000 cusecs at 750 masl blocked, it was crippling.

By the end of August, Chanderkote was literally hosting an engineering conclave with experts from JP, PDC, PDD, CWC and offshore hydraulic specialists that project consultants Lahmeyer International GmbH flew from Germany studying the crisis and suggesting remedies. There were five options on the table: siphoning off the overflowing water using giant pumps; construction of a third diversion tunnel; converting the inspection tunnel of the dam into a DT for the time being; making a hole in the dam or simply making an effort to remove the clogs.

In fact, one of the tunnels had started unclogging automatically but it got blocked again.

The initial consensus decision was to create an alternative diversion tunnel. It would cost an additional Rs 300 crore to costs and pushed the completion date by 20 more months more. Finally the engineers decided to opt for drilling a hole in the dam using controlled condition blast. A rare experiment globally, it proved highly successful and after the draining of the dam, it was plugged. There are not many such instances in managing emergencies like this.

The Chenab River

The powerhouse finally started generating energy. On October 10, 2008, Prime Minister Dr Manmohan Singh flew to Chanderkote and inaugurated the first unit. The second unit went into generation on October 28, 2008, and the final unit on March 31, 2009.

Soon after the project entered in the generation stage, its operation and maintenance was transferred to the NHPC for two years. For a two year term during which NHPC was supposed to train the PDC engineers, it would get Rs 148.20 crore. It triggered a chain reaction within the PDC as engineers said they are already trained in managing the sophisticated machine. Finally, the contract was not extended beyond September 2, 2011. During this period, PDC restricted NHPC operations and maintenance to electrical part as PDC engineers managed the civil and hydro-mechanical component of the project. PDC has paid NHPC only Rs 70 crore so far.

The project has emerged as the main backbone of the PDC. Since October 2008 till the end of April 2012 (47 months), the project has generated 9414.704766 million units of energy. It has a set system about sales. Half of the overall generations go for debt servicing. “Of this two-third energy is sold on a flat rate of Rs 3.65 per unit to the Power Trading Corporation as per the agreement and one-third is sold on the market rate that varies between Rs 4 to sometimes Rs 8 a unit,” a senior official of the PDC said. Half of the energy is transferred to the PDD for the consumption within the state.

The earnings are substantial. The project generated energy in 2009-10 worth Rs 1082.62 crore which appreciated to Rs 1114.79 crore in 2010-11. For the last fiscal ending March 2012, the total energy cost from the generations was at Rs 1001.83 crore.

Dam Looks Like A Little Ocean

The project is doing wonders for the PDC, a fully owned appendage of the state government. “Now FIs are offering any quantum of funds and we usually do not require the scale of canvassing that we did when we had no Baglihar,” a senior official commented. Offers right now are from a number of financial institutions including REC, PFC, J&K Bank and many others and there is no limit in the quantum of funds. “We obviously will have the best pick.”

Baglihar’s stage-II will demonstrate the efficiency and flexibility in the systems that the stage-I created. For the 450 MW project that will drain the water from the same dam, would cost Rs 3113.19 crore. The entire quantum of funds is tied up. The project would be implemented with the same consortium that implemented stage-I including the consultants.

PDC has suggested the state government get Baglihar-II, a mega status from the central government besides a grant of Rs 1000 crore. This assistance, PDC believes, will improve the viability of the project by reducing 35 years levelized tariff from Rs 4.48 per kWh to Rs 2.99. Chief Minister Omar Abdullah has in fact taken up the issue with the Prime Minister on September 8, 2011.

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