Elusive Power

Salal launched the NHPC, and J&K’s power ambitions in seventies. As successive governments in Srinagar sought its return, an inflexible New Delhi is unmoved despite its own expert suggesting its return. A Kashmir Life report.

Group of Ministers investigated NHPC operations in Jammu and Kashmir during Omar Abdullah’s government in 2013.

It made a headline that, many thought was politically correct. “NHPC is behaving like the East India Company,” Irrigation and Flood Control Minister Taj Mohi-ud-Din said in a seminar in the city, last week. “It is exploiting the water resources of poor states. Their attitude is arrogant and they are contemptuous towards law of the land.”

Management of J&K’s natural resources, especially water, have off late emerged as a highly emotive issue in Kashmir. Linked directly to state’s backwardness, there has been loud thinking on the issues of power in an energy deficit state that is gradually becoming a surging consumer market. For political as well as administrative reasons, various successive governments have substantially contributed to this discourse. There have been certain actions in the past as well but not as much as happened in last one year. It has led to this famous quote by senior Congress minister Taj Mohi-ud-Din who equated NHPC with the East India Company that looted the subcontinent in the nineteenth century.

Ever since he took over as state’s Irrigation and Flood Control minister, Taj has been exhibiting his total involvement with his area of responsibility. His initiatives have contributed to the debate about the state’s natural resources and helped to keep it alive.

Sensing the minister’s thirst for truth, an industry lobbyist tipped him off about certain cabinet decisions involving NHPC’s Salal Power Project. Taj dug up a series of cabinet decisions that offered details of the engagement between the state and the central government on setting up of this power station.

The details that have come in the public domain suggest that the state cabinet had suggested and conveyed to the central government that in the Salal project, J&K will have a 50 per cent share of the generations and half of the profits that it will make. The two sides were supposed to review the power requirements of the state after every five years. The project was supposed to be returned to the state government after the depreciation period was over, against a payment of 10 per cent of the project cost in accordance with the J&K Electricity Supply Act, 1971, according to the Cabinet decision No 537 taken on December 15, 1980.

Prior to that, terms and conditions of the engagement arrived at a cabinet meeting (decision No 128) in 1975 were conveyed to the union power ministry vide letter No BD-14/243/72 on July 21, 1975, following which the work on the project started.

Since the Salal Project got fully depreciated in 2003, Taj asked the cabinet to initiate the process of getting the project back. The government set up a four-member subcommittee headed by Finance Minister Abdul Rahim Rather. Other members include Law Minister Ali Mohammad Sagar, Tourism Minister Nawang Rigzin Jora and Taj.

The subcommittee that has to report to the cabinet within a month is mandated to “examine in detail the terms and conditions of (NHPCs) other projects like Dul Hasti and Uri-I”.

The committee is working and the entire staff at power ministry is dedicating almost half of its working hours to retrieval of the documents.

Earlier Taj had stunned the state by disclosing that the basic documents about NHPC’s power projects were nowhere in the state records. The land that the projects are utilizing is under occupation without any formal order from the state government, he said. The revelations were made after NHPC failed to produce any such document when they applied for registering their projects with the newly set up State Water Resources Regulatory Authority, a new body aimed at managing the water resources and charging users including power producers.

Salal is not only the speaking history of NHPC, but it symbolises J&K government’s efforts to tap its hydropower potential as well. Located in outskirts of Dhyangarh hamlet, around 21 km North of Reasi town, the project was conceived in 1920 when Kashmir existed as single solid “sovereignty”.

The investigations, however, were started by the state government in 1961, years after the partition of India, and implementation of the project started in 1970 by the Central Hydroelectric Project Control Board. Subsequently in 1978 construction of the project was entrusted to NHPC. After completion of the project, it was handed over to the NHPC on ownership basis for operation and maintenance.

Salal has two stages of three units (115 MW) each. The first stage was commissioned in November 1987. Its first unit of stage-II was commissioned in July 1993, second in 1994 and the last one in April 1995. The delay was because of the incomplete tailrace tunnel.

The station caters to a number of states. J&K has a share of 34.39 per cent including 12 per cent of the generations as royalty. The balance generation is allocated as per the agreed system – Punjab gets 26.6 per cent, Haryana 15.02, Delhi 11.62, UP 6.95, Rajasthan 2.95, Utranchal 1.21, Himachal 0.99 and the UT of Chandigarh gets the remaining 0.27 per cent.

Salal dam was among India’s foremost indigenously developed concrete gravity dams and the first dam built on a rock pedestal. The 450 metres long and 113 meters high dam with 12 radial gates controlled spillway for discharging 22,500 cumecs of flood flow. Hindustan Construction Corporation (HCC) that executed the project employed 12000 workers to set up the dam – with a total storage volume of 96 million cubic yard – that involved 9.76 lakh cubic meters of rock excavation and 14.50 lakh cubic meters of concrete placement, 4.05 lakh tonnes of cement and 16,000 tonnes of steel.

Within a few years, after it was commissioned, the project started showing the problems that the engineers had not foreseen. The ferociously flowing Chenab is one of the few Indus basin rivers that washes away foothills from Himachal and brings in tons of silt. Scientific investigations suggested that an estimated 30 million cubic meters of silt is deposited in Salal dam in a year and the process peaks during monsoons when the silt level is 12000 ppm (or 12 kgs per cubic meter). Interestingly 70 per cent of the silt is quartz and 25 per cent is sand.

Massive siltation means loss of generation. Until 2002, Salal, according to NHPC insiders was losing a generation of 38 to 102 MW – an average 65 MWs a year – for four years. As part of the sediment load would pass through the spillway, it would cause severe abrasion damage to the concrete structure and the turbine equipment.

Usually, the stationary rubber flaps and stainless steel revolving sleeve forming part of the working turbine seal would get damaged, sometimes on hour to hour basis. The damage would be routine but it would be more rampant during monsoons. This dictated a new routine for necessary repair or change of components due to silt. Sometimes these units would be in rest for as long as four months.

But credit goes to NHPC that joined hands with the Bharat Heavy Electricals Ltd (BHEL) in converting the Salal challenge into an opportunity. After studying the problem, the two jointly installed additional repair seals in all the six turbines which are functioning properly.

It was in this power station that the NHPC used and standardized Hydro suction Sedimentation Exclusion System from dams for the first time in India. It was later used in Tanakpur Power Channel (in Uttaranchal). Despite using a cocktail of extraction, flushing, dredging, panning (putting bed sediments into suspension during the flood), and hydro-suction, it may be recalled here, the sedimentation continues to be the single most important threat to Salal project.

The power station does earn from the cheapest energy that it generates but it also takes a good amount for maintenance. Its Stage-I cost Rs 61.47 crore in 1999 for renovation.

The debate deepened further when revelations suggested that the government literally surrendered before New Delhi and altered its own decision in 1980. Since it could suggest the weakness of a regime that came to power after “22 years of wilderness”, Taj came out saying the basic Salal decisions were changed in 1985, almost a decade after the state government had mooted the main proposal. How far is it correct, let the cabinet subcommittee decide?

But sources in the state government informed Kashmir Life that central government had rejected the cabinet proposal much earlier. “Then the state had come with a proposal of charging per unit of generation to make some money but then the idea of royalty to the tune of 12 per cent was suggested,” one retired officer privy to the developments suggested. “The state government grabbed the idea and somehow it still stays.”

But this is not for the first time that the issue of Salal transfer to J&K state crept to the newspaper front pages. Basing its demand on J&K’s inability to “effectively utilize” its power potential in wake of restrictions imposed by Indus Water Treaty, the water-sharing agreement between India and Pakistan, former chief minister Mufti Mohammed Sayeed sought transfer of Salal in October 2004.

The PMO, under the routine circumstances, sent the proposal to the Ministry of Power (MoP) that took its own time. Finally, it rejected the idea saying it will have an adverse commercial impact on the beneficiary states as well as NHPC besides triggering similar demands by other states.

Accepting that the Indus Water Treaty restricts the exploitation of the full power potential of J&K, MoP said other states with similar potential fell chocked owing to environmental restrictions and pressures. Since almost all other upcoming NHPC projects would be generating comparatively expensive energy, MoP says other states may argue that “J&K is attempting to cherry pick and acquire only low tariff projects” that, in the long run, could trigger similar demands by other states.

Finally, the PMO sent the issue to the Prime Minister constituted Task Force for long-term social and economic development of J&K (TF) under the chairmanship of C Rangarajan for examination and analysis of the two versions. Its report came in January 2006.

The TF literally blasted some of the arguments that the MoP had made. In its report, the MoP had conveyed to the PMO that transfer of Salal involves financial implications to the tune of Rs 10,284 crore. But the TF said the centre will have to cough up a one-time net amount of Rs 3735 crore only. While MoP has put the value of the project at Rs 1311 crore, the TF evaluated its book value at Rs 615 crore but asserted the fair value on basis of its net present value stands at Rs 875 crore. Against the replacement cost of Rs 5000 crore as estimated by the MoP, TF said a similar project would require an investment ranging between Rs 3795 to Rs 4140 crore.

J&K is sharing the generation from the Salal project with seven other states besides the UT of Chandigarh. Since the transfer would provide J&K authority for exclusive use, it would require compensating other states for managing their requirement from expensive sources after they give up their rights from a low-cost source. While MoP has put the losses to beneficiary states at Rs 8973 crore, the TF said it would not cross Rs 2862 crore which they must get as one-time reimbursement to manage their requirements elsewhere.

Besides, MoP had said operating and maintaining the huge project would be challenging for J&K that lacks a record of managing such a huge project. In response to this, the TF had suggested that if the transfer of Salal takes place, J&K would not only continue to supply power to the Northern Grid for next five years but will also enter into a commercial agreement with NHPC for operating and maintaining the project.

The transfer, according to TF, would have been a net gain of Rs 4064 crore to the energy-deficient J&K. But the MoP arguments led the PMO to reject it.

Rangarajan, however, had offered an alternative in case New Delhi decides against transferring the project. He had suggested the central government to offer J&K an alternative package that would make the upcoming 450-MW Baglihar debt-free from day one of its commissioning and pave way for using the generation without waiting for around a decade.

Based on a series of evaluations and calculations, TF said that an outright transfer of the project with “difficulties and possible repercussions” would eventually help power-starved J&K to the tune of Rs 4064 crore but the alternative would fetch it Rs 3642 crore while its share in the Salal (34.39 per cent) would remain intact.

Then, J&K government was desperately working overtime to manage the completion of its flagship Baglihar Power Project. TF wanted the central government to take over the debt liabilities so that it fetches J&K energy from day one and offers it a source of revenue by selling the energy during summers. Then, Baglihar was supposed to be completed at Rs 4000 crore of which Rs 1600 crore was equity of the state government, Rs 630 crore had come as special central assistance and balance Rs 1770 crore was the debt part that various FIs provided. The deadline for its completion was 2008.

The TF has suggested that central government should take the debt servicing obligation on the term loan (at nine per cent for 10 years) that would greatly help the state by making the energy available to it the moment project is commissioned. Under this plan, J&K would get 2773 million units energy from Baglihar instead of 2020 million units if Salal is transferred.

In the 10 years from commissioning of the project, J&K could earn Rs 3632 crore by selling the energy at Rs 2.50/kWh while it would be barely Rs 2959 crore if it gets Salal.

TF calculations suggest that transfer of Salal would mean a one time net outgo of Rs 3735 crore while in case of accepting the alternative New Delhi would have to bear only Rs 2775 crore of which Rs 2055 would have to be paid over a span of 10 years starting with Rs 336 crore in the first year that would drop to Rs 193 crore in the last year.

Rangarajan had suggested that if the J&K government will accept the alternative option, it would be entitled to get almost 50 per cent of the power generated by Salal till the time the Baglihar is commissioned. The central government was supposed to compensate the Salal-beneficiary-states for their decrease in the power share which would roughly cost around Rs 90 crore a year.

Baglihar missed all the deadlines thanks to the cosy relationship that the successive state government’s enjoyed with the consortium implementing it. It cost the state government a whopping Rs 5827 crore and it was formally inaugurated in October 2008 by the Prime Minister.

Ironically, it was NHPC that bagged the operations and maintenance (O&M) contract for two years charging Rs 74.10 crore a year. It maintains the project for J&K since September 2009.

After the report helped politicians create a couple of news items, the government was overtaken by other issues. Recommendations of the TF lacked any follow-up. It got just reduced to a reference, a course, many believe, the renewed Salal debate is expected to follow.

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