The advice to cancel the project had come from MP’s advocate general, Rishab Kumar Jain, on February 22 last year, according to documents obtained through an RTI application filed by activists of the Narmada Bachao Andolan (NBA). Business Standard has a copy of the RTI application.
The power purchase agreement was signed between the MP government and S Kumars in 1994 for the purchase of Maheshwar power for 35 years.
However, currently, the cost of Maheshwar power is about Rs 10 per unit, which would force the MP government to pay an additional amount of about Rs 17,000 crore in the next 35 years, even though much cheaper power is available. This has been necessitated by a guarantee given by the government to enable the company to get funds for the project. However, the MP electricity board has refused to buy power at such a cost when power is being purchased elsewhere in the state at Rs 2.44 per unit.
The government is also reeling under the impact of a counter guarantee it had provided the company in 2006 of Rs 400 crore for the repayment of optionally fully convertible debentures (OFCDs) borrowed by the company from the market. Since the company failed to repay the OFCDs, the counter guarantee was invoked and the state had to pay Rs 20 crore in the last one year.
All these factors and developments prompted the government to seek the advice of the advocate general on whether cancellation of the project could put an end to the guarantees and counter guarantees it had provided to the company.
The advocate general clarified to the state government that while it could not avoid the counter guarantee of Rs 400 crore, it could definitely do without paying for the guarantee that it had given on power purchase. The guarantee was linked to the date of commencement of power generation. Since the company could not produce power by that date in 2011, the agreement could very well be cancelled, he said.
The capital cost for the project has jumped manyfold to Rs 4,200 crore. It was approved as viable by the Central Electrical Authroity at Rs 1,673 crore. The jump came about after the project was suspended for six years and dam properties were attached when the company failed to pay loans taken from the MPSIDC.
The non-payment of loans and the escalation in cost led the MPSIDC to even write to the Reserve Bank of India in March 2004 saying that “certain companies have defaulted willfully in the repayment of dues to MPSIDC. We consider it necessary to bring to your notice, the names of such defaulting companies and their promoters. We strongly recommend that these companies and their associated concerns may not be provided any financial assistance till they fully discharge their liabilities towards the MPSIDC.”
NBA activists along with anti-corruption activist Prashant Bhushan today demanded immediate cancellation of the PPA. They demanded that an FIR be lodged against the company for cheating and conspiracy against the government. They also called for an investigation by the CBI of the massive embezzlement of public funds.
They said the present government led by the BJP and the previous government led by the Congress were hand in glove with the company and went ahead with the project despite losses of crores of public funds.
“They would take a position against the company and then continue to support them financially. This has been the pattern so far and it would continue, unless the CBI investigates the loss of public funds caused by the governments alongwith the company,” said Bhushan.