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Monumental folly: why India's first private sector hydel project is rotting

Ajay Mawker | Updated on: 13 February 2017, 9:21 IST

The dam

  • Maheshwar dam was touted as India\'s first privately built dam
  • It was conceived in 1978, but work started only in 1997
  • S Kumars, its promoters, have repeatedly defaulted on dues

The rot

  • The project cost Rs 2,200 crore but has produced any electricity yet
  • Cost overruns have hit 200%, from Rs 1,569 crore to 4,700 crore now
  • It\'ll affect 60,000 people in 61 villages, completely submerge 22 villages

Touted as India's first privately financed hydel project, the Maheshwar dam in Mandleshwar, Madhya Pradesh, stands as a monument to the poverty of our "development" discourse.

It took over two decades and Rs 2,200 crore to build. But it hasn't generated a single unit of electricity so far. Worse, it is a disaster waiting to happen.

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This is how the project was sold: it would change the face of the Narmada valley, it would light up thousands of homes.

This is how it stands now: power to various units of the dam has been cut because S Kumars, the promoters, have not paid dues of Rs 74 lakh to the state power distribution company. Since the pumps have been shut, the power house runs the risk of being flooded. The galleries meant for maintenance of the dam are already inundated.

Not just the machinery, the jobs of 250-300 employees are also in jeopardy. The employees have not received salaries for 13 months, forcing many to quit. And there is no money to get them replaced.

So, what has caused this dam to go powerless even before it could light up one of the country's darkest corners?

False start

Maheshwar dam was part of the Narmada Valley Development Project, which entails construction of 30 large and 135 small dams across the Narmada valley.

The project was conceived in 1978 under the aegis of the Narmada Development Authority. The task of building the dam was initially given to the Madhya Pradesh Development Electricity Board, or MPEB, in 1989.

However, massive protests against the Narmada project - including the more contentious Sardar Sarovar dam, which lies downstream from Maheshwar in Gujarat - erupted soon after, causing the drying up of international funds.

The Madhya Pradesh government then handed over the project to S Kumars, one of India's leading textile giants, in 1993.

Maheshwar dam is in the dark because its promoters, S Kumars, haven't paid power bills of Rs 74 lakh

The next year, the project received a conditional clearance from the central environment ministry. But the project remained stuck for another three years as displaced people awaited relief and rehabilitation.

Work finally began in 1997 after the state signed an MoU with S Kumars. In 2001, the project came to a standstill as the company defaulted on repayment of a 44.75 crore loan to Madhya Pradesh State Industrial Development Corporation, or MPSIDC.

MPSIDC declared S Kumars a willful defaulter and took over its land and properties at the dam site. The Narmada Bachao Andolan alleged misuse of public money by S Kumars, and demanded a CBI probe.

Yet, the public sector Power Finance Corporation was compelled by the then Digvijaya Singh government to inject public funds into the project.

Second wind

In 2005, the state agreed a settlement with S Kumars. Under it, the company would issue post-dated cheques of up to Rs 55 crore to MPSIDC in return for loans. But the cheques bounced, leading to police complaints against its owners, the brothers Mukul and Warij Kasliwal.

Construction started again in November 2005 and continued until 2011, notwithstanding repeated allegations of financial irregularities against the company.

By this time, three turbines with a combined capacity of 120MW were ready for power generation.

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The government allowed the project's promoters to fill the dam up to a height of 154 meters, a move upheld by National Green Tribunal in August 2012.

The NGT, however, revoked the decision after local villagers pointed out that the tribunal had "ignored the Central Electricity Authority's opinion" that no power could be generated at 154 meters.

In 2012, the state sent a notice to cancel the power purchase agreement, stating that the company had failed to start commercial operation and had no funds to complete the project and rehabilitate the displaced.

The project was to produce electricity at Rs 2.64 per unit. Now, the cost is likely to be Rs 12-13

Several efforts have been made since to bail out the project. In 2014, the state set up a committee to explore options for funding it. The panel suggested that the state cancel the power purchase agreement with the company, get a PSU to take over the project and infuse fresh funds into it.

There was one difficulty though: the project required at least Rs 2,000 crore, half of which would go to rehabilitation of the displaced. Not surprisingly, no PSU has been inclined to invest.

Going under

All this has essentially made the project unviable. Its cost has gone up from Rs 1,569 crore to around 4,700 crore, a 200% cost overrun.

Then there is the issue of tariff. It was projected to be Rs 2.64 per unit when the project started, now the cost has shot up to an estimated Rs 12-13 per unit. But the state has made it clear it won't buy at more than Rs 5.37 per unit.

Maheshwar dam is expected to affect around 60,000 people in 61 villages. Of these, 22 villages will be completely submerged.

About a third of the affected people are from backward communities such as Kevats and Kahars. Once the dam is completed, they will lose their homes and livelihoods.

The project threatens to submerge over 16,000 hectares of private agricultural land and 7,169 hectares of state land. Hundreds of sand and stone quarries as well as important cultural and archaeological sites would also be destroyed.

So far, according to estimates, only about 20% of the rehabilitation work has been done. The cost of completing the work is expected to run into thousands of crores.

Last week, the NGT ruled that the gates of the dam can't be closed and it can't be filled up for power generation until the rehabilitation work is completed.

While this is a relief for the affected families, it is bad news for the state's efforts to give the dam a new lease of life.

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First published: 18 November 2015, 7:36 IST