NHPC turns down bailout proposal

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The Union government-controlled National Hydro Power Corporation (NHPC) has declined the offer by Power Finance Corporation (PFC) to take over the beleaguered 400-megawatt (Mw) Maheshwar hydro project in Madhya Pradesh, citing viability issues. The company, however, is ready to "take over the operations of the project on chargeable basis".

The lenders had approached the company recently through the Union power ministry. The project, which had earlier been privately held, is in rough waters in the wake of the current promoters "defaulting on equity infusion". Three machine have been installed at the site.

Struggling for 23 years now, the future of the Rs 1,700-crore project has also been wobbly with no government utility or state government willing to support it.

Established in 1993 by MW Corp (formerly S Kumar Limited), the project was to sell power at Rs 2.64 a unit. The project, which was a part of the 'Narmada Basin Development Plan' of the MP government, has been embroiled in controversy since its very inception. While the resettlement and rehabilitation (R&R) has been under the clouds, the 'Narmada Bachao Andolan' has also been protesting against the project asking for a re-survey of submergence.

Officials familiar with the project said there were problems with regard to compensation for land acquisition as well since no payment had been made. "Though the land was notified and there is a court verdict of giving 11 per cent more since the compensation was delayed, it is not clear whether now after the new land acquisition law, the compensation would have to be reworked," said the official.

After constant delays, the project cost is estimated to cross Rs 6,700 crore and the power tariff close to Rs 11 a unit. It is also learnt that the current owners are likely to exit the project by paying 11 per cent of the land cost to the Madhya Pradesh government.

According to a source, the current power tariff of the Maheshwar project has touched Rs 15-16 a unit. The project requires further fund infusion of about Rs 2,000 crore. "To put equity and any further money in the project is futile. NHPC is being pursued to take over the project, but that is out of question. This would also depend on what decision the power ministry takes regarding the project," said an NHPC official requesting anonymity.

A consortium of lenders led by PFC, Hudco, Rural Electrification Corporation, and several state-owned banks have infused close to Rs 2,200 crore in the project till now, of which PFC has the largest exposure.

A high-level committee was formed in October 2014 under state additional chief secretary and state finance department, to iron out problems between the private developer, lenders of the project and Madhya Pradesh Power Management Company.

There were three options before the committee: fresh equity infusion by the developer; if the developer fails to do so, the project would be handed over to any central public sector unit in the sector; or as a third option, termination of the existing power purchase agreement.

Senior PFC executives said MW group promoters wanted PFC to take over the projects. It in turn requested NHPC or NHDC to take over the project, but none of them replied positively because of controversies involved and poor progress on R&R by the current promoter.

NHPC is the state-owned largest hydel power company in India with 6,507 Mw operating projects and another 6,000 Mw under construction / awaiting clearance. NHDC is a joint venture of the Madhya Pradesh government and NHPC, which has completed two major power projects - 1,000-Mw Indira Sagar project and 520-Mw Omkareshwar project