On 24^th 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.

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 9^th 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 2^nd 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.

No doubt, it would end the sufferings of poor customers who just don’t seem to know how to get back their hard earned money from the bank. But, would this Rs. 225 Crore revival package indeed revive the sick state owned Apex Bank? Does this package really ‘pro-poor customer’s’?

Let’s glance over the statistics. Out of this Rs. 225 Crores, the bank has to cough up about Rs. 160 Crores that it owes to its depositors and I’m pretty much sure that the depositor would not want to keep their amount further in the bank and would withdraw whatever amount is left in their accounts and close their accounts at the first given opportunity. Also, as I was told, Rs. 40 Crores has to be deposited as a security to retain license to run the bank. Then there are outstanding salaries to be paid to the employees of the bank and other office expenditures. So, where is the amount left to revive this sick state owned bank? Is the whole initiative just an eyewash? In case the bank wants to carry on its business, there is little scope that it would return all the money of the depositors. Then, how is this initiative pro-poor customer’s? How would it end the agony of the customer’s? I don’t have a clue.

And when the management of the bank and the politicians are hands in glove for this entire mess, I don’t understand the logic behind mortgaging the future interest of the state. How is this justified to use the revenue of the state to cover-up for their interest (to divert attention of public from loan defaulters) instead of putting the revenue in development of the state? Shouldn’t they emphasize more on loan recovery than taking advance or grant, whatever, from other institutions? Or as someone has said, is it yet another exercise by the Government to make some privileged few a millionaire overnight again at the pretext of bringing relief to poor customer’s? Though the government has assured transparency, it is yet to be seen how transparent would the Government be, in dealing with this initiative.