The prime minister has roped in economist C Rangarajan to formulate a “jobs plan” for the youth of J&K. However, people here are asking, what happened to the recommendations he had made earlier to rid the state of chronic financial and energy woes. A Kashmir Life report.
In Kashmir Dr C Rangarajan is back in the news. This time because Prime Minister Dr Manmohan Singh tasked the renowned Indian economist and a former RBI governor (also earlier governor of three states) to head a panel that will, within 90 days, “formulate a jobs plan” and increasing “employability in the state” of J&K. This is his third assignment on Kashmir front since 2005.
This time as well, he has a good team – N R Narayana Murthy, Tarun Das (chief mentor of CII), P Nanda Kumar, and Shakeel Qalander from Kashmir (who said he was not approached even for mandatory consent) and an official representative of the J&K government who is to be nominated by chief minister Omar Abdullah. The team will interact with the National Skill Development Mission and see how jobs will be created in public and private sector.
Not many fingers were raised over the economic aspect of the Prime Minister’s televised speech to Kashmir on August 10. Instead lot many questions were raised about what happened to Dr Rangarajan’s earlier prescriptions to Kashmir?
Dr Rangarajan’s tryst with J&K started after Prime Minister Dr Manmohan Singh appointed him as head of an 11-member task force to frame a long-term plan for the integrated social and economic development of J&K on March 29, 2005. It had a large mandate of identifying sources of finance – locally, nationally and globally – to fund the development of the state and the projects it suggests. Besides, it was tasked to analyze issues, economic or otherwise, referred to it by the prime minister.
Well before it could start its formal activity, a dispute about state’s power crisis was referred by the Prime Minister to him that was hanging fire for some years. In October 2004 J&K government had formally written to the Prime Minister to transfer the NHPC-owned Salal Power Project to the state.
Located at Dhyangarh in Reasi, Salal is an ISO 14001-certified project that has no liabilities and generates over 3400 million units of energy a year. Constructed at an investment of Rs 960 crore it supplied power at the rate of 0.52 paise a unit to Punjab, Himachal Pradesh, Haryana, Delhi, Rajasthan, UP, Uttranchal and the union territory of Chandigarh. As the Ministry of Power opposed the idea, the Prime Minister sent the request to Dr Rangarajan for analysis.
After discussing the issue, Dr Rangarajan came with a win-win formula for the state and the centre. He suggested the central government to offer J&K an alternative package that would make the 450-MW Baglihar debt-free from day one of its commissioning and pave way for using the generation without waiting for around a decade. This was in lieu of state surrendering its insistence of seeking the transfer of 690-MW Salal Power Project.
Based on a series of evaluations and calculations, the task force 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 percent) would remain intact.
Apparently this seemed a win-win situation for the state and the central government. 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 can 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 and sells the generation.
The task force calculations suggested that transfer of Salal would mean a one time net outgo of Rs 3735 crore while in case of accepting the alternative it 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.
After taking his report, the Ministry of Power rejected the idea of transferring Salal to Kashmir. The transfer, it said would have adverse commercial impact on the beneficiary states as well as NHPC besides triggering similar demands by other states. It did not accept the alternative, however. Instead it paid Rs 630 crore to help the state government manage part of its equity in the Baglihar that cost over Rs 5200 crore. J&K has access to only half of its generation as the half is sold to the market by Power Finance Corporation to mange debt servicing!
After eight meetings, Dr Rangarajan’s panel submitted a detailed report to the Prime Minister in November 2006. The report suggested a series of projects that were worth around Rs 8000 crore. Apart from a number of quick yielding projects (QYP), the panel suggested a Rs 200 crore asset reconstruction company (ARC), Rs 200 crore investment in ‘image enhancement on this side of the LoC’, a Rs 200 crore satellite business city on Srinagar outskirts, and investment of Rs 200 crore in a special industrial zone (SIZ) on SEZ pattern.
But it was again the energy that was at the core of his recommendations. He recommended the 1020-MW Bursar be shifted back to the state from NHPC (it was given to NHPC by Dr Farooq Abdullah) along with the funds for execution. Then, he suggested the central government to transfer 330-MW Dul-Hasti power project to the state. The project was getting readied. The transfer would fetch J&K 1928 million units – a net saving of Rs. 500 crore a year. 
Dulhasti on Chenab has witnessed unprecedented time and cost overruns and was finally put in generation mode only in 2008 after a whopping investment of Rs 5050 crore. With an investment of Rs 12.94 crore per MW, the panel said NHPC will absorb huge operating losses by selling energy to beneficiary states at prevailing Rs 2.50/ kWh against the generation costs of five rupees per kWh.
Assuming that NHPC should be quite satisfied if the central government compensates the equity investment and debt servicing, the panel says NHPC would get Rs 2020 crore. The total liability for the central government would be Rs 4933 crore involving cash outflow of Rs 984 crore in the first year tapering off to Rs 321 crore in the 10th year.
This option, the panel report says works better for all the three parties – J&K, NHPC and the central government. For J&K, the report says, a new project with design energy of 1928 million units for 35 years at a levelized tariff of Rs 0.65/kWh would be a net gain of Rs 6804 crore at 10% discount rate which is much higher than the gain of Rs 5622 crore that would accrue to J&K in case of transfer of Salal HEP (assuming the market rate of Rs 5.0 /kWh). The liability for the central government would be lower: Salal involves potential liability of Rs 5452 crore unlike Dulhasti that would cost Rs. 4933 crore.
The report was accepted but neither of its recommendation implemented!
Dr Rangarajan was in the middle of his assignment when the new job was created by the situation in May 2006. This time he was tasked to head one of the five Working Groups that the Prime Minister invited Round Table Conference on J&K had set up. The working group on the economic development was tasked to evolve a strategy that ensures (a) balanced economic development and employment generation and (b) balanced regional and sub-regional development within J&K.
The learned economist had learned a lesson while dealing Kashmir for the government of India. He headed many meetings and presided over a number of interactions in Jammu, Srinagar and Delhi. Knowing fully that all the initiatives on Kashmir lack seriousness, he repackaged his earlier report as the WG report and submitted it to the Third RTC on April 24, 2007 in Delhi. This time he suggested various projects worth Rs 7947 crore but did not change the focus of his prescription. This time he wanted Rs 1750 crore for rural roads besides reiterating his suggestions over Dulhasti, SIZ and ARC. Officials said the report would eventually take the shape of PM’s Reconstruction Plan-II.
Now Dr Rangarajan will take a fresh look at the economy of the state and with the help of honchos in public and private sector, he will give magical solutions for job creations. Even when all his earlier recommendations are gathering dust, it is not difficult to foresee the fate of his new exercise. But how huge is the link between the ongoing crisis and the unemployment?
