Altering Ratle

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An 850-MW power project within less than three-km radius is a prized possession. After state government experimented with the Chenab basin Ratle project near Kishtwar and failed to implement it, the central government discovered a Joint Venture route and gave it to the NHPC for implementation when Prime Minister Narendra Modi visited the state last week, reports Masood Hussain

Under construction Ratle Power Project.

Nine months after dedicating the controversial 330-MW Kishanganga Hydroelectric Project to the nation, Prime Minister Narendra Modi on February 3, 2019 presided over the signing of a Memorandum of Understanding (MoU) between the National Hydroelectric Power Corporation (NHPC) and the Jammu and Kashmir’s Power Development Department(PDD) for the 850-MW Ratle Project.

“An MoU was also exchanged on the occasion between JKPDD and NHPC Ltd for execution of 850 MW Ratle Hydroelectric Project on river Chenab in Drabshalla area of district Kishtwar,” the state government spokesman said in a statement. “The project will be executed through a joint venture between NHPC and JKSPDC,” NHPC added in a separate statement.

Neither the state government nor the central government offered any idea about how the project will be implemented. Not even the name of the agreed JV was mentioned and no details were revealed about the shareholding. This was enough for raising fingers.

“The MoU was stealthily signed between officials of PDD and NHPC in presence of Prime Minister to allow NHPC to become 51% owner in 850 MW Rattle Power Project,” Engineer Rasheed, Kashmir’s vocal politician, told a news conference, a day after he was set free from the custody. “NHPC is acting like East India Company which has been looting the resources of state continuously, and I appeal NC, PDP, Civil Society and Joint Resistance Leadership to move beyond words and tell Delhi louder and clear that this is not acceptable.”

A Compact Project

The signing of the MoU has taken the project’s chequered history to a new level. Located downstream of NHPC owned Dul-Hasti hydropower project, 25 km from Kishtwar at Drabshalla, this is one of the most compact projects that Chenab basin can ever offer.

“It is a project that is easiest to implement as it does not involve a lot of lands and technically it will operate within a few sq km,” Dr Shah Faesal, the IAS 2008 topper, who resigned the coveted service to join the politics, said. His last assignment before leaving for studies at Harvard was the Managing Director of JK State Power Development Corporation (SPDC). “None of its four head race tunnels crosses 200 meters length and its longest of the four tailrace tunnels is 378 meters and its dam is within 200 meters area.” The project does not displace much, only 240 families with around 1700 members (requiring only Rs 262 crore) are affected but none of them is actually dislocated. It is in a better and stable geological situation than all other Chenab basin projects. “Being closer to the main road makes it hugely low-cost,” he added.

“At one point of time we genuinely knew only the small power projects,” one senior executive in the SPDC said. “But after the successful commissioning of the 900-MW Baglihar, we now know everything. We have technical expertise; we have an impressive balance sheet and we have accessible resources to implement the project but I am amazed the way it was given to the JV. I do not know why it was done.”

Office of the Chenab Valley Power Projects in Jammu

The Ratle transfer is gradually getting into the public debate and adds to the economic exploitation narrative that has NHPC at the core of it. Political beings from all sides will be using it during campaigning as well.

Innovative Bidding

Unlike all other projects, Ratle has an interesting past. Conceived and surveyed much earlier, the project was approved for implementation under BOOT (build, own, operate and transfer) during Ghulam Nabi Azad era in 2008. After Omar Abdullah took over, the government experimented with the innovative bidding on the basis of the tariff, perhaps for the first time in India.

Of the five bidders including Reliance and Birla Power, Hyderabad based GVK Development Projects Pvt Ltd bagged the deal with Tata Power and L&T ending as second and third bidders. GVK bagged the Rs 5500 crore project by offering upfront premium of Rs 5 lakh per MW, 16 per cent generation as royalty (including one per cent for local area development), levelised tariff of Rs 1.44 per unit and Rs 380 crore as terminal price to be paid to the developer at the end of 35 years for transferring the project back to the state. Run of the river project, Ratle was initially expected to be 690-MWs but a fresh survey by the GVK improved its capacity to 850 MWs. On June 25, 2013, the then Prime Minister Dr Manmohan Singh flew to Kishtwar for laying the foundation stone and hoped it will get into generation by December 2017.

Awarded to GVK in 2010, the cabinet accorded approval to lease out 567.22 hectares, comprising 138.93 hectares of forestland, 281.09 hectares of state land, 55 hectares of private land and 92.2 hectares of riverbed area falling in Drabshalla village, to GVK for 35 years in 2012.

GVK worked really hard in 2013 when the implementation started. After a fresh survey, it managed its environmental clearance and then got into financial closure. It later inked deals with French equipment-maker Alstom for electro-magnetic part worth Rs 842 crore and with Larson and Turbo (L&T) for the civil works. It also built a couple of bridges and started working on the diversion tunnel (DT).

A Failed Experiment

All of a sudden on July 12, 2014, the work stopped and the workers fled citing law and order situation. Implementation came to a grinding halt. Early 2015, when the SPDC officials sat for negotiations, GVK had a long list of grievances: state government not supportive, host population hostile, enhanced protection to its staff, a weaver to a set of tax issues including water tax that state promulgated after the project was given to the GVK. It also sought compensation for any delay in implementation that Indus Water Treaty clearance may take. It attributed the resignation of its project head, Martin Bookly, a Swiss, to the appointment of influential youth and lack of local support.

A view of Baglihar Power Project on Chenab River.

“They were referring to instances in which the locals seeking jobs allegedly attacked their offices and personnel,” one SPDC executive said. “But there was not even a single FIR with the police that would corroborate the accusation.” But the PDC agreed that certain tax issues would be taken care of. Eventually, GVK sought cancellation of the contract.

“Those were interestingly terrible days,” one SPDC insider said. “After they sought cancellation of the contract, we moved a court in Kishtwar invoking a direction that the SPDC would en-cash the bank guarantee and got a direction after hiring an expensive lawyer.” With Dr Shah Faesal as MD, the SPDC flew a 7-member team to Hyderabad to cash Rs 52 crore. “GVK was already in the court when we were in the bank and the bank was delaying the payment, forcing SPDC to write to the RBI by around 12:30 pm that the corporation would send the case to the CBI if the bank does not honour the cheque. The money was transferred to the SPDC account by 12:45 pm and the GVK got a stay order at 1 pm.”

Minutes later, the bank wanted the money back but the SPDC had shifted the amount to another account. The project was lost, but the bank guarantee was invoked successfully. GVK had already paid an upfront premium of Rs 34.5 crore (for 690 MWs) to the state already.

SPDC insiders said the GVK later approached them saying they have spent more than Rs 1000 crore on the project and they should get back at least Rs 600 crore. “To our estimation, they had done quite a little on the spot, maybe Rs 100 crore or more,” one insider said. “So we refused.” In reaction, GVK filed a suit against SPDC for Rs 5316 crore and SPDC reacted by claiming a loss of Rs 5600 crore for not implementing the project. Eventually, it went to the arbitration by the Court as IIT Delhi was entrusted to do the asset mapping and evaluation of the work done by GVK. There has not been any decision on this front so far even though the mapping part has reportedly been completed.

Two PDP leaders Nizamuddin Bhat and Naem Akhter had alleged kickbacks after the deal was announced. Omar took them to the court where Bhat apologised but Naem is still facing the case.

SPDC experts said the GVK apparently faced a problem that it had not factored in when it signed the agreement. “They hoped that part of the energy that is not covered by the Power Purchase Agreement (PPA) with PDD would sell at a good cost in the open market,” one insider said. “By then, the market changed and the availability of solar power reduced the power costs, especially during the day, and it hit the viability of the project from GVK angle. That marked the unmaking of it.”

Now the wheel required to be reinvented after the power purchase agreement (PPA) was annulled by the PDD, early 2017. SPDC that was earlier working as an authorised agent for the Power Development Department(PDD) sought the project saying it will implement it on its own through EPC. NHPC was keen to take over.

A Crucial Meeting

After a lot of back-channel negotiations at the level of the Prime Minister’s Office (PMO), Delhi finally flew its water resources secretary Dr Amarjit Singh to Srinagar for a meeting with a group of ministers along with an alluring package on October 11, 2017. The group of ministers comprised Dr Nirmal Singh, Lal Singh, Naem Akhter, Sunil Sharma and Dr Haseeb A Darbu. Outright ownership was flatly refused.

Highlighting the power resources of the state, the Secretary insisted on an “advanced level of expertise” and “substantial financial resources” as the “major impediments” in Jammu and Kashmir’s failure in harnessing the full hydropower potential. Referring to the three projects (850 MW Ratle, 1856 MW Sawlakot and 930 MW Karthie), Dr Singh said these would require an investment of Rs 26000 crore. He suggested a JV with one of the many CPSUs that Power Ministry owns. In case of JV, he suggested, the equity component of Rs 7800 crore can be shared on 50:50 basis with the partner. The Secretary said the private sector investment is Jammu and Kashmir’s power sector is not reliable as the GVK experience explains.

“Under the proposed arrangement, the Govt of J&K can provide as a part of its share of equity through government land for the project and tax exemptions for plants, construction materials, equipment, machinery and services for direct use in the construction of the project until the date of commercial operation,” the proposal recorded in the official communication said. “The Govt of India shall provide a remaining share of equity to J&K as a grant. The debt for the project shall be raised by the JV Company for which Government of India may also provide necessary support by making the debt component available on attractive terms.” The project would be returned to the state after the concession period is over, he insisted.

A file photo of under construction of Kishanganga Hydroelectric Project.

Drabu, according to official records, expressed his concern over the delay in the execution of the projects by CPSUs and “highlighted the ownership aspect” particularly in the context of the demand for transfer of certain NHPC projects back to the state. He suggested “investor developer” model instead.

Drabu offered two options – one, the centre transfers 30 per cent to state and trusts SPDC in implementing the projects; two, centre transfers only 15 per cent of the total cost of the three projects and the SPDC gets 15 per cent stakes from the private sector and funds the exercise. Normally 70 per cent of the costs in all projects is debt financed. There was no decision.

Unlike BJP that could have made it big if the deal would succeed, PDP could not afford it. With the power sector in sharp focus of the public, the PDP in its Agenda of Alliance (AoA) had told the people that it will be bringing back some of the projects.

The AoA had expressly mentioned that the coalition will “explore modalities for transfer of Dulhasti and Uri hydropower projects to J&K”, secure “a share in the profits of NHPC emanating from J&K waters”, revise all royalty agreements and “restructure and strengthen the Chenab Valley Power Projects Limited as a holding company for all hydropower projects in the state”. Different from operational companies, holding companies buy, own and control shares from other companies.

The agreement apart, the BJP at the centre did not move even an inch towards it. “Every time, we asked for it, they said, they will do it in the last year of the coalition so that it benefits us politically,” one PDP insider said. “We never knew they would make the government fall much before that.” Piyush Goel, the then Power Minister, flew to Srinagar many times to reiterate that the Government of India will never consider the transfer of any NHPC power project to Jammu and Kashmir.

NHPC has a complex history in Jammu and Kashmir and that is at the core of Kashmir’s economic narrative. After starting as an informal joint venture at Salal, the Government of India set up NHPC without even taking Jammu and Kashmir into the loop. Decades later when a group of ministers looked into the fraud, they found two former Chief Engineers responsible for erasing every iota of evidence that would establish the fraud clearly.

PM Narendra Modi during his recent visit to the valley inaugurated and laid stone to various projects including Kiru Power project.

After effectively establishing itself, the NHPC was transferred Dul Hasti (Kishtwar) and Uri (Baramulla). Unlike Dul Hasti that suffered because of the technological crisis, the Uri was completed in time despite serious challenges on the security front. After Dr Farooq Abdullah returned to power, he transferred seven more projects to the NHPC.

This made NHPC the king of hydropower. As it continued exploiting state’s water resources, Jammu and Kashmir continued getting 12 per cent of generation as royalty and an unfair percentage in the jobs the operations created. It reached a stage that in 2007-08 when NHPC recorded a generation of 14811 million units from its operations across India, 54.26 per cent came from its three operational projects in Jammu and Kashmir. The share of Jammu and Kashmir in the overall generation of energy in 2013-14 was 55.79 per cent which reduced slightly to 55.77 per cent, a year later.

By 2017-18, when NHPC had six projects operational in Jammu and Kashmir, it had 44.17 per cent of 22975 million units of an overall generation coming from the state. In the current fiscal, the share is expected to cross 50 per cent as the Kishanganga has got into generations early last year. An interesting aspect of this generation is that most of the energy that the NHPC projects generate is being purchased by the PDD.

A Group of Ministers reports during Omar Abdullah that was in response to the public sentiment actually sealed the possibility of an outright transfer of a new project to the NHPC. The imposition of water usage charge was also part of that campaign which actually has backfired and hurt SPDC more than the NHPC.

The JV Route

It was in this backdrop that the Government of India took the JV route. Understanding the crisis on the ground, the then energy minister Jairam Ramesh negotiated successfully with the state government the first JV called Chenab Valley Power Projects (CVPP) that is mandated to implement three major Chenab basin power projects- PakalDul, Kiru and Kawar. NHPC and SPDC have 49 per cent stakes in the JV as NTPC holds the balance two per cent. Almost a decade later, however, the CVPP has not been able to even complete the first project. In fact, Modi, during his recent visit, laid the foundation stone for the 624-MW Kiru project.

After the failure in Ratle take-off, the government started working towards a JV. Though the SPDC has the expertise and credibility to implement the project, the state planners have deliberately chosen a path to destroy the corporation that is making more than Rs 350 crore profit a year. The government takes all the power the SPD generates but does not pay it.

It was in this backdrop that governor Satya Pal Malik led State Administrative Council (SAC) opened the Ratle for discussion. On September 5, 2018, SAC accorded sanction to the “formation of a separate Joint Venture Company, having Government of India (Central PSU) and Government of J&K (J&KSPDC) as the two partners owning defined shares in the Company, for the object of development of the 850 MW Ratle Hydro Electric Project (HEP) and its transfer to the State of J&K within a period of seven years from the start of commercial operation of the project.”

The official spokesman said the Raj Bhawan sent a set of five JV models to the central power ministry. “The analysis of the models have revealed that all of these will be favourable to Jammu and Kashmir with majority ownership remaining with State (ranging from 51% to 90% State ownership),” the spokesman of the SAC said. “The last attempt at promoting it (Ratle) as a PPP project with a 35-year concession period failed. The Joint Venture is the best route now to realize the potential of the Ratle HEP.”

There was an expectation that the governor’s administration would put the draft MoU in public domain so that people respond to it but it did not happen. The signing of MoU during Prime Minister’s visit came as a surprise. Both sides were silent to the extent that nobody offered even a hint about what its name is and what is the shareholding pattern.

“It is named Jammu Hydropower Projects Corporation,” Hirdesh Kumar, state’s power secretary, also holding the charge of Managing Director SPDC, said. “Details I may not be giving because we are issuing a detailed press note soon.” Insiders in the government said the MoU has SPDC as a minority shareholder with only 49 per cent equity.

Insiders in the government said the state bureaucracy was in a hurry to ensure that the Ratle is somehow tied-up with NHPC. “We should move fast and take a decision as a popular government can interrupt,” one senior officer was quoted saying in a meeting, to which a senior executive of NHPC reacted: “No Sir. We got all the projects from NC government. If we take a decision, they cannot stop it.”

On July 20, 2000, when the state government transferred seven projects: Kishanganga, Uri-2, Sewa-2, Pakal Dul, Bursar, Nimo Bazgo and Chutak, for implementation to the NHPC, the MoU had an interesting clause: “A mutually acceptable methodology will be worked out for handing over these projects to J&K Govt separately.” Five of these projects are already operational. A middle rung SPDC executive said when he initiated the process of follow up on the transfer issue, his bosses told him: “It is the prerogative of the political executive and not you.” The file was never moved.

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