After being the longest-serving chief executive of J&K Bank and making it state’s first and the only listed company, Muhammad Yousuf Khan, the man who has left indelible marks after every assignment, stepped into the energy sector and took over as chairman of the Chenab Valley Power Projects (CVPP), a JV between state and three central PSUs, within days after it was set up. After eight years of leading the company mandated to install 2300 MWs, Khan hopes to lay the first brick of one of the three projects this summer. In his first major interview in a decade, he revealed many things for the first time to Masood Hussain
Kashmir Life (KL): Mohammad Yousuf Khan, a SICOP man, an Agro man, then the J&K Bank Chairman and now for many years heading an energy company. How Mr Khan wore all these hats and how was the experience?
Muhammad Yousuf Khan (MYK): Very difficult to say but it basically needs the motivation to contribute something to this state. When I joined Agro Industries, there was absolutely nothing. Almost out of nowhere, we achieved a turnover of Rs 20 crore and for the first time, the PSU was in profit.
Earlier, I went to Mussoorie when Wajahat Habibullah was the Director and I spoke to IAS probationers. They asked the question: How JK Bank achieved the great heights? I told them was that I have introduced ATM. They confused it with ATM, the cash dispenser. I told them no. My ATM is Accountability, Transparency, and Merit. This helped me change JK Bank.
It was a challenge for me. I remember when it was announced that I am going to be the Chairman; newspapers reported what the man with zero banking experience will do? But touch wood, everybody knows that for the first time in bank’s history it was rated as No 1 bank among all banks. The then RBI governor, Bimal Jalan, gave me the best bank award.
You need the motivation to contribute. I have taken this new assignment in power.
When I took over, I saw newspapers reporting that Khan is getting hefty salary as much as chairman NHPC. My salary was discussed in the Board (of Directors) ten times. Every time they wanted me to take the salary, I refused. I have not taken a penny from this organization so far because my only reason for coming here is to contribute something. What I did in JK Bank, I want to do it here. I have decided to take my salary but only after I start the physical work on the projects which is happening soon Insha Allah.
KL: When will that finally begin?
MYK: By March we intend to start two projects, Pakal Dul (1000 MWs), Kiru (600 MWs) and Kawar later part 2018. Once all these three projects come up, we will have 2300 MWs additional power. The state will become power surplus. Let me tell you the way we are working, our power cost should be between beyond Rs 3-4 rupees. This is going to be the only project which can produce power at that rate.
KL: Power projects have long gestation periods. But you took over CVPP in 2011 and now we are into 2018?
MYK: To be honest, we didn’t have a choice. I am also unhappy. Believe me; I was frustrated because you know how I work. I want results and as fast as possible. When we started with Pakal Dul, its transfer from NHPC to CVPP took a year to fix the modalities. They were trying to push some employees which we didn’t want. They were also claiming huge amount which they said, they had spent. There was a dispute on that. So it took a year and a half to sort of these issues. Then it took us two and a half years to get clearances from the Supreme Court and the Environment Ministry. Later, when the project report was prepared and was ready to go to PIB, what we found was that it was going to be a highly expensive project.
You cannot imagine, how I managed to get Rs 2500 crore subordinate debt from Government of India (GoI) at one percent rate of interest. The beauty of that debt is that it has to be repaid only after all other commercial loans are cleared. For a loan repayable after a long time – managing it was not so easy. I managed some concession from the state government as well for which I am grateful to them. All these concessions helped make the project economically viable. There were other reasons as well which I can’t disclose. There was a delay in appointment of directors in absence of clearances. These hassles, which I had not thought about, in the beginning, created unfavourable circumstances but we have overcome everything.
KL: What about Kiru?
MYK: It is in the final stage. For Pakal Dul, we have now everything in hand.
KL: Who is implementing Pakal Dul?
MYK: The civil works package for construction has been awarded to M/s AFCONS JAL but overall it is going to be a non-local partner and one overseas partner. There will be the combination of two for the dam project. For E&M and H&M, there will be foreign companies who will be coming. One good thing about all these projects is we have a tremendous response from all over the world for E&M and also for the dam project. All the well-known foreign companies are participating. And that gives us a lot of confidence that these projects will be implemented in time.
KL: Financial closure is over of Pakal Dul?
MYK: Yes, in a sense that we have got a commitment from Rural Electrification Corporation Ltd (REC) that they will give us the entire amount which is required, not only for Pakal Dul but for all the three projects. Our total requirement is roughly nine or ten thousand crore, and REC is giving us the entire amount. Believe, It took me some time to negotiate even the rate of interest. The rate of interest we had negotiated in the beginning was 11.5 percent but I brought them down to 9.5 percent. I have not given up. I am confident I will get this money at 9 percent. That will add to the viability of the project.
KL: As it is the joint venture project, where from the equity will come. How is the state participating?
MYK: So far the Pakal Dul is concerned; the state doesn’t have to bother about the equity. We managed that from Government of India. They had given us equity for Pakal Dul on behalf of the state government. Both, the subordinated debt and equity are coming from GoI. No contribution from the state so far as Pakal Dul is concerned.
KL: Then, how will J&K state claim its ownership of 49 percent?
MYK: They are partners. Whatever money I have received from GoI is going to be on behalf of J&KPDC. Funds have nothing to do with shareholding. So far as other two projects Kiru and Kwar, we have requested GoI again to consider our requirements and I am hopeful they will. But meanwhile, the state has also given us the commitment that if there is some problem, they will help. It is a small amount.
KL: Are land acquisition costs also being funded from the equities?
MYK: Yes. That is part of the equity. Everything, even the cost of the land, the roads, all infrastructure will be paid by the CVPP.
KL: Dachin, Wadwan, Madwa belts are up in arms that the little sea a project is creating will devour them?
MYK: Unfortunately, this is being related to our projects but they are not against our projects. What you talked about the displacement of the people, there are only 45 houses so far our project is concerned and all of them have agreed to move. We are giving them good compensation and they are in agreement.
What they are discussing is the Bursar project which is a large dam project. That is going to create the problem but not our projects.
KL: CVPP has three projects but, at one point in time, Bursar was to be implemented by you as well?
MYK: They asked us to do it but we refused. The cost of the power is huge. I don’t know how NHPC is going to do it, maybe they might get some financial support. What I know is that its itemized cost is Rs 28 per unit. So where from they are going to get money so that it becomes viable, I am not aware. But yes it was offered to us, but we refused to do it.
KL: Has there been some kind of basic spadework to actually go closer to the Pakal Dul site?
MYK: It is all done. That is what has taken a lot of time. To be honest with you, Pakal Dul, we had to do all the basics ourselves. The geological study took quite some time. You know what happened in Uttarakhand. That forced us to take extra measures to make sure nothing goes wrong.
KL: The mountains in which you will be working are the very unstable. You must know the Dul Hasti experience where they lost a TBM?
MYK: What we did is that before tendering the TBM, we appointed a foreign consultant. He did a lot of work there to make it sure that nothing goes wrong. Second, the latest technology in TBM ensures that what happened before will not happen again. You would have seen Kishanganga, TMB was involved there and it worked very well. Now there is the change in technology also. Dul Hasti is an old project.
KL: So in the two other projects, when do you see that actually start?
MYK: See Pakal Dul and Kiru between March and April 2018. Kwar sometime in September-October 2018.
KL: Since Mr Khan has personally been involved in creating local expertise for local issues. Now you are handling perhaps the major power utility in J&K after the JKPDC. So is there any hope that we will have some local companies up skilling to take on smaller power related works?
MYK: Whoever is coming for these projects, they all will have sub-contractors. They all will gain experience during the implementation. Besides, what we have done is that our maximum employees are locals, and 90 percent I would say are the basic workers. Even at the engineering level, we have more than 70 percent locals, which don’t happen in any other project. We have made it sure that we involve local engineers, local people and they will be trained enough and in future, I am sure even some local people want to set up a project, they will be quite helpful for that.
KL: CVPP is four years old. It has four masters. Have they contributed anything?
MYK: For take Pakal Dul the entire money is coming from the Central government, the state has given a small portion of Rs 80 crore so far, but that is not only for Pakal Dul, that is for all the projects, an initial amount which they have contributed. But NHPC has contributed Rs 350 crore so far and another Rs 100 odd crore has come from GoI directly to CVPP which is the contribution on behalf of JKPDC. Out of this, I think 70 percent has been spent on acquisition of land. Around Rs 250 crore has gone to the forest department, the rest of the money has gone to the private landowners, balance money has been spent on various activities including Geological studies and other manpower management.
KL: How huge is CVPP?
MYK: We should be now having close to 300 people on our rolls of which and around 200 are at the site, mostly engineers. These include 150 people who were transferred to CVPP with the projects.
KL: NHPC in Srinagar means a lot. How has been your relationship in managing NHPC and handling one of the major projects?
MYK: I would always say central Power Ministry has been very supportive and NHPC, we have to maintain good relation because in a lot of things we take their help like in technical evaluation, designing. They are not on our rolls, but NHPC is our partner. We have been involving them as they have experience.
In comparison to JKPDC, for instance, we are doing better. They have done only one major project and we will be having three totalling 2300 MW.
People may criticize us that we may have delayed, yes, but the delay has been beyond our control. We have made every effort to see that these projects come up.
KL: How you manage the difference in the perception at the state level while handling NHPC, a company that a Congress Minister once famously said was the East India Company in Kashmir?
MYK: We made it very clear to NHPC that this is our project and is coming in this state. We should have the say in these projects and I think by and large they have been very supportive. They have not interfered. They have not done anything which will harm J&K interests. Even on the employment front, we have made it sure that most of the locals are employed. Although as per the agreement, at engineer level, it had to be 50:50, but we made it sure that more than 70 percent are state subjects. So that way they have been supportive and cooperative.
KL: But how could NHPC not manage the concessions and CVPP managed it despite having a shared NHPC ownership?
MYK: There is a difference between the projects they implement and the projects we implement. One, the state is almost 49 percent shareholder, more than that we have the first right of refusal which you can’t have on NHPC projects. Unless we say we don’t need power, they cannot sell it. So we have almost control over 100 percent generation. Price will be decided by CEC. Nothing will happen without the support of the state government. You have seen the fate of the JVK project. What happened to that? Has any large project come up, other than Baglihar so far? So at least you will see, God willing, three major projects starting in 2018.
KL: By the time you will go to CEC for rate fixation to ensure a PPA later, the energy sector might have changed a lot. It is a commodity that is openly tradable now. At policymaking, there are voices that instead of investing in greenhouse projects, why not purchase in open market at cheap rates.
MYK: I had a discussion with power ministry in Delhi as well. What we are talking about today is the solar energy which is, of course, cheaper in comparison to thermal power because coal costs have gone up. But solar energy is nowhere going to match hydro in the long run.
Reasons are very simple. How much solar energy can you generate against the demand in future? Solar will be the small component but the bulk supply will come from hydro and thermal. Hydro is clean energy. It is cheaper as well. Do you know Salal power costs 35 paise, a unit? You have to understand the advantage of hydro projects after 15 years when they are debt free.
KL: Coming back to politics of it, Mr Khan worked with different Chief Ministers. How you manage such an excellent relationship with politically diverse persons?
MYK: It is very simple. You know my reactions with Farooq Sahib, very close relationship and when I was in the bank and before that also when I was heading SIDCO or SICOP, he was the Chief Minister. I never allow my personal relations to interfere with my work. I have worked as a professional and continued as a professional. When I left JK Bank, I think Barkha Dutt asked me if I was joining politics, I said no. She asked me why. I said because I don’t like politics. The second word which I used and I should not have was that I don’t like politicians. To be honest with you, wherever I have been I have been totally disconnected with the politicians and the politics. I didn’t allow the interference anywhere.
When Mufti Sahab became Chief Minister, some people asked me and newspapers reported that I should quit or leave because I am close to Farooq Sahab.
I told Farooq Sahab that I am going to meet Mufti Sahab and submit my resignation, which is proper. I went to Mufti Sahab, met him and he received me very warmly and asked: “What brings here?” I said, Sir, I saw the newspapers and I am sure you won’t like me to continue. But he said No. I know your relation with Farooq Sahab, please continue with those relations. You might have been meeting him twice or thrice a week, now, you should meet him more frequently.
So far the bank is concerned I know you have worked as a professional, I have been to Bangalore, Mumbai, Delhi, met people and they have told me how you have helped them, how you have helped the industry, businesses and how this bank has grown. I don’t want you to leave. You have to continue.
After I got that confidence, I asked him that I should have no interference. He said I promise there will be no interference. I can tell you there was no interference during that period. Believe me, I have not appointed a peon during that time. Same was with Farooq Abdullah. Ask anybody, I have never compromised, so far the functioning of the bank is concerned.
When I became the Chairman, Dr Sahab recommended three proposals. All the three were rejected by us. He called me and said what this is? I asked him, why did they come to you and not to me? They could go to the manager. You know I am begging for good proposals, I told him; I even used your good offices to meet Dhiru Bhai Ambani and others. He said I don’t know because they are my friends.
I said no, they have problems with banks, they are defaulters and that is why they brought on using your influence to get that money from us. Would you like to do that? No. He said. He never interfered, later.
I think they have seen my work and they recognised how I work in CVPP. When Mufti Sahab came, the second time, I again went with my resignation. I went to Chief Secretary that time, I didn’t go to Mufti Sahab because I was travelling when the government changed and I was told that I will be asked to quit. I went to CS with my resignation letter asking him to send it to the CM. He, in my presence, called Mufti sahab and told him, Sir, Yousuf Khan has submitted resignation.
Mufti Sahab said no question; ask him to see me tomorrow morning. I went to see him, and he said you have to continue. When you keep your politics apart, when you work as a professional when you don’t allow people to interfere, I think that is how you succeeded.
KL: How about JKPDC emerging as a power utility?
MYK: They have a good MD now. We have been interacting with each other very frequently because he is a good guy. So we have a good understanding. He wants to contribute, he wants to do something but he has his own problems, the board, the meetings are not taking place in time.
But I believe there is going to change and they will have a professional Chairman, the Board with professional people. I think once the changes take place, he is the guy who will really contribute.
KL: Didn’t you see it as a diversion that the incumbent Finance Minister, your erstwhile colleague at JK Bank, replaced his signature power budgets by Panchayat?
MYK: That is fine. So far the power is concerned he knows and I know what is going to be the contribution from the state. That he is committed already. While preparing the budget, first time I have seen that equity is being separately discussed for the projects coming up in the state which covers our projects also. We may need it or we may not need it.
In Pakal Dul we didn’t need it. For two others projects, we may succeed in getting funds from the centre. But for the first time, it is happening that separate provision of equity for our projects is covered in the state budget. We don’t need beyond that anything from the state. In case equity doesn’t come from the Government of India, then the state government has to support us which they are committed to.
KL: Are you grooming somebody in CVPP to finally take over from you?
MYK: I would say both yes and no. Yes in the sense that we have people, engineers, most of them are locals. They may take over at one point in time. But at senior level, unfortunately, it is not happening for the reason that we need experienced people at the top level and not very few experienced people are capable enough to lead the CVPP. But I am trying to get some senior people now into the organisation from the state who can be groomed and who can take over at some stage.
KL: How huge CVPP Board?
MYK: We have three directors each from NHPC and the state in addition to the Chairman. We don’t have any independent director as of now but we are going to have independent directors soon.
(Tasavur Mushtaq processed and edited the interview)