Over to PDC

As the NHPCs questionable acquisitions became the barking headlines in Kashmir, setting up cabinet sub committee was the natural response from the government. It submitted its reports last week. Tasavur Mushtaq offers a sketch of the recommendations.

J&K’s Power Development Corporation (PDC) is studying the report that the cabinet sub committee formulated and the cabinet approved last week. It is aimed at getting NHPC’s three of the four operational projects back. Actually, these are to be bought at the depreciated cost.

Insiders in the power ministry said there are three major recommendations. Firstly, a senior officer has to look into the disappearance of the vital documents pertaining to the NHPC operations in the state and fix responsibilities.

Secondly, power department has to monitor the implementation of the 2000 agreement under which seven power projects were transferred to NHPC for implementation. One of them Sewa-II is operational and two small micro projects in Ladakh – Chutak and Nemo Bazgo, and Uri-II are expected to go into generation within a year. The government will reopen the case of Dulhasti-II with NHPC and explore the possibilities of implementing it under a joint venture with the hydropower major.

Thirdly, the Power Development Corporation with state law ministry will start making a case for buying back three operational projects – Uri-I, Salal and Dulhasti, at the depreciated cost from NHPC. The government will start negotiating the issue with the central government.

The sub committee with Finance Minister Abdul Rahim Rather as its chairman (Taj Mohiuddin, Ali M Sagar and Nawang Rigzin Jora as members) was set up in June 2011 at the peak of an expos? that NHPC is operating its power stations in J&K without the basic documents. Besides, the revelations – the outcome of activism by Taj and a civil society group, suggested that the NHPC has been cheating the state on account of sharing of the benefits from its generations. This was a shock to one and all and it encouraged one of the cabinet ministers to draw parallels between the NHPC and the East India Company.

As the government started digging up the details of its engagement with the NHPC on Salal – the Chenab basin 690-MW power project that was implemented before the NHPC was born, it was surprised that there was no agreement at all. They could only trace a series of relevant cabinet decisions. A cabinet decision (No 537 taken on December 15, 1980) had detailed the terms and conditions on basis of which Salal would operate. While state was supposed to take half of the profits that the station would make, J&K was to get 47 per cent of the total generation including the royalty part. J&K was supposed to get the project back against a payment of 10 per cent of the project cost. This was the main reason for setting up of the 4-member committee.

The recommendation of an officer looking into the disappearance of documents is important for accountability purposes but it lacks larger consequences,” an official privy of the developments said. “It is the recommendation of getting the three functional power projects back that is important.” But how to do it?

The projects in question include 690-MW Salal, 480-MW Uri (1) and 390-MW Dulhasti. These form the bread and butter of the NHPC in J&K. These projects contributed more than 47% of the overall generations to the NHPC in the financial year 2010-11 by producing 8842 million units. Apparently NHPC is unwilling to sell these projects because it will destabilize the energy supply sector in most of the northern region

Besides, J&K lacks any agreement between the state government or the PDC and NHPC that would pave the way for their return. In case of two projects, there is some saving grace, officials admit. In case of Uri-I, the main document is missing but in the correspondence between state government and the NHPC it is clear that state has the right to buy it back at depreciated cost or stake the claims over any increase in the generations of the project by way of additional resource infusion. Its depreciated value was Rs 2100 crore last year.

In case of Salal, the entire agreement is missing. However the cabinet decisions, apparently agreed to by the then power ministry at Delhi, forms a basis of negotiations. The sub committee report says the Union government is committed to offer 47 per cent of the power generated by Salal to the state, half of the profits of the station and a royalty of 1.5 paisa/ kwh. Against these terms, NHPC has been offering only 35% of the generations, including the royalty of 12%. The sub committee has assessed a loss of Rs 2350.85 crore between 1987 and 2011.

The state government lacks any such ground for tackling the Dulhasti power station on Chenab basin. The sub committee has suggested two options. One, to study the national power policy that was in vogue at the time of the implementation of these projects. Second, to invoke the buy-back clause that exists in the 2000 agreement that Dr Farooq Abdullah signed with NHPC for seven power projects. Under the MoU, J&K government is entitled to buy back these projects at the depreciated cost.

But the sub-committee is not identifying any of the seven projects that it would like to take over because barring one, all others are under various stages of implementation. Of the seven projects, 1000-MW Pakal Dul is almost returned as it will be implemented under the JV between PDC and NHPC. 120-MW Sewa-II is operational. The remaining five – 330-MW Kishen Ganga, 240-MW Uri-II, 1020-Bursar, 45-MW Nemu-Bazgo and 44-MW Chutak are at various stages of implementation. Uri-II and the twin projects of Ladakh will go into generations later 2013.

Law ministry will have to burn midnight’s oil to explore the possibility of how it can be managed. With PDC, they have to make a case for the crisis on internationally accepted norms envisaging the depreciated cost of the projects. But can a clause be retrospectively implemented if both the parties lack the basic documents of a deal they struck more than 30 years back?

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