Tuesday, July 3, 2007

Was Rs. 225 Crores deal a smart move?

On the one hand, New Delhi is holding the fate of the state to ransom-no one knows for sure what will be the final outcome of boundary settlement with China and on the other hand, as some quarters feels, the policy maker’s of our own state is holding the future of the state to ransom. And that too, despite the warning and protest by them not to mortgage the future of the state.

On 24th June evening, a cheque of Rs. 225 Crores exchanged hands between S. K. Garg, CMD of National Hydroelectric Power Corporation Limited and Dorjee Khandu, Chief Minister of Arunachal Pradesh, which the state government is taking as an advance to be adjusted against 12 per cent free power share (water royalty) in future, on the pretext of reviving the state owned sick Apex Bank.

When the state government announced their plan to revive the sick state owned Apex Bank by taking some amount as an advance against revenue to be accrued from ‘water royalty’ (free power) from the Hydro Developers in the state, it was presumed that advance would be given to the state government without any additional rider-just as a simple token for allowing them to take up Hydroelectric Project in the state. But, I forgot, they all are business institutions and there is a way to do business. And indeed, the Rs. 225 Crore advance given by NHPC Ltd. against 12 per cent free power of 750 MW each Tawang-I & Tawang-II Hydroelectric project and 3000 MW Dibang Multipurpose Hydroelectric Project was not without a rider, it was with an interest at a rate of 9% per annum to be compounded annually which was to be adjusted only after commissioning of the project. And this, the government feels, is a miniscule amount and would not over burden the debt service liability of over Rs. 1000 Crores that it presently has.

“[..] the state government would pay interest of 9% for the amount only after commissioning of the projects, including 2000 MW Lower Subansiri Project at Gerukamukh, which would be adjusted from the 12 pc free power to be provided to the state by the corporation, he added. When his attention was drawn to large protests by various quarters for taking advance and thereby mortgaging the future of the state, Sanjay clarified that the state already had a debt service liability of over Rs.1,000 Crores and this small amount would not be a burden. Some sections were trying to sabotage the government initiative, which was a serious threat to the state development, he commented.”

Echo of Arunachal

Was the move smart enough?

I would say, surely, but in the context of National Hydroelectric Power Corporation Limited alone. By extending this advance or should I say, a loan of Rs. 225 Crores, NHPC Ltd. has made a clever business move. Basically, any Hydro Power Developer would have started earning only after commissioning and commercial operation of the project, but here in this case, NHPC Ltd. would be earning right from signing of MoA. Now, technically, they have all the rights to execute these mega projects namely, 750 MW Tawang-I HEP, 750 MW Tawang-II HEP and 3000 MW Dibang Multipurpose HEP. And with this deal they have clinched 3000 MW Dibang Multipurpose Hydroelectric Project from the state government and would now be developing alone which was earlier announced as a Joint Venture between the State Government and NHPC Ltd.-which, I thought then, was the only sensible step that the State Government took in these entire exercise of tapping the Hydro Power of the state. But now that too has gone to NHPC Ltd.

By asking for this advance/loan of Rs. 225 Crores the State Government has actually set itself back by at least 1 ½ years. Considering the long gestation period of any Hydroelectric Project-here 9 years for Dibang Multipurpose Project, 6 & ½ years for Tawang-I Project and 6 years for Tawang-II Project (Source-NHPC Ltd.), if we assume that all the three projects are up and running by 9th year (the time that would be required for construction and commissioning of Dibang Multipurpose Project) from now and with the 2268.78 MU (Million Units) of energy that the state would receive as a 12% free power from 18906.5 MU of energy generated by these mega projects in a 90% dependable year (Source NHPC Ltd.) and with a tariff of say @ Rs.1.64 per unit (levellised tariff for Tawang-I Project), we may actually end up earning from these projects only after 2nd year of commissioning of these projects, thereby, as felt by some quarters, mortgaging the future of the state by 2 years.

Coming to the main purpose of taking this advance; the state government is contemplating engaging private consultancy firms from Kolkata and Mumbai for evolving management system in the Arunachal Pradesh State Apex Cooperative Bank to run it with professionalism after its revival. But would the sick Apex Bank indeed be revived? I’ve my apprehension's though. And if the state government keeps on making such deals to cover-up for their mismanagement instead of bringing the culprit to book and recover the amount, the claim of Aruanchal Pradesh becoming the richest state in the country when the state starts earning revenue in the form of free power from these Mega Projects, seems quite vague to me.

And coming back to the question 'was the move smart enough?', I'd say yes. Now, the people are left guessing how soon can they withdraw their money and close their accounts.

Update (17-07-2007): Hmmm.....the wait of the poor customers' would be ending soon for the CM has announced reopening of the State owned Apex Bank from August 2.

"About 65,000 account holders of Arunachal Pradesh State Cooperative Apex Bank have reasons to cheer with Chief Minister Dorjee Khandu today announcing its reopening from August 2 next."

-The Arunachal Times

Hope the Cheer of Account Holders are not short lived.

12 comments:

  • Raka

    This is not mortgage AG.
    This is robbery by DK and bania-style moneylending by NTPC.

    You, me ,even Sanjay& DK himself and whole AP public knows this is a Govt of oppurtunists held together by money(as was the prev Apang and Mithi Govts).Apex Bank is the fig leaf excuse--I'm sure the money would be digested and expelled by these people very soon.Once the money runs out the Govt would collapse, another rich fellow comes in and repeats the drama all over again.

    You have given a very optimistic projection.I'm sure it would take ages for the hydels to commence full production--remember Ranganadi and its one decade overshoot of deadline and hundreds of crores of budget overrun?
    In other words,NTPC has just cleverly invested 225 crores to a sucker who would keep on paying 9%interest for eternity.

  • AG

    You are right, though as per GoI new hydro power development policy, the project has to be commissioned within 6 to 7 years from 'Zero Date'-the date from when all the clearances has been given, but no one knows for sure what 'surprises' you would encounter when you venture out in such a mega project and time delay in commissioning of the project is quite inevitable-unless you are quite expert in dealing with such 'surprises'. And as pointed out by you, Rangandi H.E. Project by NEEPCO is a classic example.

    When trying to analyze what the State Government has put to stake, I just assumed for sake of analyzing, that the project would be commissioned and put to commercial operation within 9 years-longest scheduled time period of completion among the three projects as scheduled by NHPC Ltd. as such, the projection quite optimistic.

    Here I want to add another twist to the move of Rs. 225.00 Crores deal. What if, after say 15 years NHPC Ltd. are not able to complete the project for whatever reasons and backtracks, how will the state government repay the amount with 9% interest compounded for 15 years? Hope, the state government has looked into this matter before sealing the deal. If not, the future of the state is indeed bleak and we would end up repaying till eternity.

  • Nani Riniyo

    Rs.225 Crore...huh!! this sounds a very huge amount.I myself is confused that how many zeroes does follows after 225??I dunno much about the State's present political status,but after going through this post i began to feel pity on our leaders.They seems to be lured by the zeroes in Rs.225 crore.They are not knowing what kind of ill effect it gonna create in future.

    In most of the journals and papers its generally found that our State is refered as a Powerhouse of the country.Its even cited that in coming future Arunachal is going to be the richest sate of the Demorcatic India.....topics goes on expanding... Okay,i do agree this as a gift from mother nature.Everybody keeps on talking about the power generation and its advantages.They(Power Sectors like NHPC,NEEPCO and others) refer this as the source of developement in hilly state like ours in terms of water royality.But, no body seems to be interested in discussing about the forthcoming consequencies from such projects.During our recent trip to 2000 MW Lower Subansiri Project at Gerukamukh,i had a nice experience while talking to the officer in charge there.When i aked him to highlight briefly about the Environmental destructions caused for the said project,he mocked at me and told that they are quite learned about the matter and trying their best to replace the destruction caused by afforestation project on the dumped muck field.The way they responsed my query was not upto my satisfaction.I wonders,how much this policy of Greenwash is going to work out ??? Only question marks are left in my head.And the most of funniest thing i experience there at th site was that the workers were very confused about where they were landed,i mean whether in Arunchal or Assam.Most of them kept mumb because they were afraid that they may would trap into the problem if they name out the place they are working,is not this a ridiculous??? Even EIA report prepared by NHPC has been very much criticised by others.This is all about my personal experience during my visit at the site.

    Coming back to the topic,accepting advance money from NHPC for the reviving the state owned Apex Bank...its a something like selling our dreams.Our Apex Bank Co. can't grow and survive untill we ourselves don't cooperate with the system.There should be a proper management and rules/regulations should be maintained same for all public whether he is a Rich politician or a Poor Farmer.Only blaming at the Politics and the corruption may not help us much for the future of the state.We have to create awareness among the public mass.
    Lastly,the once upon a time hydropower was believed to be the cleanest forms of electricity generation,but recent the researches carried out found that the Large scale hydro-electricity generation which depends on the building of dams and creation of reservoirs releases vast amounts of harmful methane and nitrous oxide into the atmosphere.This directly contributes the Global Warming. This can lead us to the doomsday of our biodiversity richest state of the country. This message should be pass to all higher authorities dealing with these megaprojects.One should not sell the future of entire people/ecosystem for personal benefits.

  • AG

    @Nani Riniyo,
    I feel sorry for you that the NHPC Ltd. officials did not responded to you properly regarding the effect on environment owing to large scale muck disposal and quite literally mocked at you. Instead they should have explained you on how they would be mitigating the effect on environment, be it aforestation, be it catchment area treatment, may be fish ladders in the dam for safe passage of fishes in the river..etc…etc. I would say, their approach towards dealing the public was quite casual and unprofessional which they shouldn't have done.

    And yeah I do agree with you that though, once termed as the cleanest source of Power, now hydro-power is not the cleanest source of power; it is one of the factors attributing to 'Global Warming'.

    And regarding Arunachal becoming richest state in the country from hydropower, it could be, but the people and the government should choose between earning from 'free power' or from whole of the project itself. I mean, why can't the government develop these mega projects by themselves and earn revenue from entire project than just the 'free power'. Free Power?...Is it really free.

    And regarding reviving Apex Bank with this Rs. 225 Crores, Raka has the better answer.;)

  • raka dada

    Nanii,
    The AP govt(Lijum Ronya & Mithi to be specific)gave away the rights of the Left bank of Subansiri and nearly one whole circle(Dolok Banggo of Kangku circle)to Assam in order to fill their own pockets without asking the Galos of the area.
    This area of AP(called Durpai in Galo, Gerukamukh is Assamese)which has been sold off by Lijum &Mithi to Assam has been for centuries OCCUPIED by Galo people and there is no Assamese habitation in the vicinity. The people of this area resisted attacks by thousands of Assamese to occupy their land in 1989 killing dozens of them by arrows &guns.3-4 years back also another Mishing intruder was beaten to death after which Assam police raided alongwith CRPF.
    Now all these sacrifices have been whittled down to zero by Lijum Ronya and Mithi for commissions.

  • Nani Riniyo

    @Ag
    Thanks for your console,that was my part of duty to ask them a question because we have to care for generations to come.Indeed u have pointed out the right thing here.From past two years, it has been kept coming to hear that our Power and Hydropower deptt are getting converted to a Corporate sectors.If that happens in near future,they should take up all these megaprojects or atleast few of them.There is no question about lacking menpower in our state.So many engineering graduated are still unemployed.Apart from these,there are abundant natural resources(like the best quality of sand and rock) rquired for construction purposes in those proposed areas.Here,We should emphasize more on "Why to let other parties have the greater part of profits from our resources???" When particularly NHPC Ltd has not mention much about the benefits for local netizen in their EIA(Environment Impact Assesment) report.


    From internet and other sources,I have also found that EIA of NHPC prepared by WAPCOS are not upto the mark.Nothing much has been mentined about the disaster managements for coming future.Many of the datas they have used are not valid one.They have prepared the report only for the sake of saving themseves.Having a large dam structures in earhquake prone zone like ours won't be out of risk.We should get full assurance from them.We public of Arunachal has got full right to inquire about their updated EIA.

  • Nani Riniyo

    @Raka,
    That was a great chunk of iformation to me as my political knowledge about our home state is very poor,thanks to you.Earlier,I was wondering why workers there were behaving that way.During that trip,I met few of local workers in the NHPC and they were telling that some years ago,the railway track around the site was demarcation between the two states.Now i m getting a better picture of the scenario.I am wishing and praying that nothing more should trouble our local residents of the vicinity in particular and our people in general.

  • AG

    Riniyo,

    I’m afraid if the State Government is really interested in developing these Mega Projects themselves. It seems they are more interested in stuffing their coffers. The state has Arunachal Pradesh Hydro Power Development Corporation, which was supposed to construct the 3000 MW Dibang Multipurpose Project along with NHPC Ltd. but now they won’t. The question here is not about manpower or the technical know-how but of the will of the Government. The main excuse the government would be giving for not taking up such mega projects would be the fund crunch. But think logically, can’t the fund be generated? There are this whole lot of financial institutions like ADB, JBIC etc., which I guess would be more than willing to invest in such mega projects by granting loan to the state. Then as you have mentioned, there is this manpower shortage and technical know-how. But then, the problem can be solved by outsourcing- why not project be developed by awarding the construction and commissioning contract to firms/PSU’s who has technical know-how instead of giving the firm whole project on BOO basis? We may put clause in the contract for imparting training to our engineers regarding the nuances of Hydro Power Development. When trained, we may start taking up mega projects by ourselves. With the employment a mega project generates, I do feel unemployment problem, be it technical or non-technical, would end once we start taking up Mega Projects.

  • Rome Mele

    Good post.
    Well, am glad there are people around who are cncerned about this whole Dam issues, and farces involved with the proportional upliftment of life standard of local people, with the increase in numbers of such projects.

    I was back home few months back and I was infact deeply involved with this Dibang Basin Multipurpose Project's anti Dam stand.
    The uncanny part of this Deal signed between DK and NHPC was that; this deal went ahead even though 90+% of Dibang valley people were quite against these whole Dam chapters.
    Believe me, its 90+ , and I hope any sensible creature would have weighed the importance of this fraction. But, maybe, Arithmetic doesn't suffice to amuse our CM, and hence ignoring the views of locals , he and his cabal of money sucking politicians went ahead with mortgaging our(IDUs and Adis)ancestral land.
    This is something that has happened for the first time in the annals of our history , and the Global Economics and banking sectors too would seem amused by this kind of Marketing strategy, where a state govt(which should stand for state's people) finds it no important to seeks people view and revive its , comatosed Apex bank.
    Maybe our politicians could give tips to other major banks, on how to its EASY NOT TO RUN A BANK BUT RESSURECT IT . halleluia !!

    But being a prudent optimist, i hope there are better things in store for us, in not so seemingly far future.

    Welcome aboard !!

  • AG

    Thx Rome.

    Could you highlight more about the issues affecting people around the Dibang Basin Project? May be I would do a post or two on this issues later in my blog.

  • Rome Mele

    AG ....
    I would surely let you know, but am quite busy with some other works these days... except I can find time in commenting.
    Will update you for sure !
    :)

  • AG

    Rome,
    Looking forward.....

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