MP Government terminates power purchase agreement for Maheshwar Power Project; historic victory says NBA

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Bhopal: In a significant and historic development, the Government of Madhya Pradesh has terminated the power purchase agreement for the Maheshwar power project, holding it as against public interest. Along with this, the escrow agreement and the rehabilitation agreements for the project have also been terminated. This is a historic victory for the affected people of the Maheshwar project, who have been persistently fighting this destructive project for the last 23 years under the aegis of the Narmada Bachao Andolan. The termination of the PPA will save Rs. 42,000 crores of public money.

Termination Order:

On 18th April, 2020, the Madhya Pradesh Power Management Company Limited, an agency of the State government, issued a Termination Order to the project promoter Shree Maheshwar Hydel Power Company Limited owned by the S.Kumars group terminating the Power Purchase agreement executed between the State Government, MPSEB, and the project promoters in 1994. The Order states that the cost of Maheshwar power is abnormally high, above Rs. 18 per unit, thus the project is unviable. The Order further states that since the cost of purchase of this expensive power from the Maheshwar project will be passed on to the public, expensive power purchase from this project is against public and consumer interest, thus the PPA is being terminated in public interest. The Termination Order also states that the PPA is being terminated with immediate effect because of repeated failures of the S.Kumars to comply with crucial financial and technical deadlines and milestones, including ensuring timely commissioning of the project and infusion of monies by the S.Kumars, and breach of the manifold provisions of the PPA.

The Termination Order dated 18.04.2020 also cites the judgment dated 12.03.18 of the National Company Law Appellate Tribunal (NCLAT) directing the Central Government to carry out a forensic audit of the Shree Maheshwar Hydel Power Corporation Limited under the supervision of the CAG of India in order to unearth fraud and to punish those responsible. The Termination Order dated 18.04.2018 states that it is clear from the direction for investigation and forensic audit that some serious fraud has been committed with regard to the public funds infused in the Maheshwar project.

The escrow and rehabilitation agreements for the project were terminated vide Orders dated 20th and 21st April 2020.

Maheshwar project:  

The 400 MW Maheshwar power project on the river Narmada, in District Khargone, Madhya Pradesh slated to submerge lands/homes/livelihoods in 61 villages with a rich land and riverine economy, is one of the 30 large dams built or proposed to be built in the Narmada valley. It was privatised in 1994 and handed over to the S.Kumars group. The Power Purchase Agreement required the Madhya Pradesh government to pay the S.Kumars crores of rupees of public money every year, for 35 years from the date of the commissioning of the project, whether or not the electricity was purchased by the Government.

Determined struggle of affected people of Maheshwar for the last 23 years

For the last 23 years, people of the Maheshwar area have been persistently struggling against the destruction to be wrought by the Maheshwar project, under the leadership of the Narmada Bachao Andolan and senior activists Alok Agarwal, Chittaroopa Palit and the people of the Maheshwar area. On the basis of facts and documents, from the very beginning the Narmada Bachao has demonstrated that very little and very expensive electricity will be produced from the unviable Maheshwar project. However, because of the anti-people PPA with S.Kumars, the State government would be forced to purchase or pay for this electricity, which would destroy the economy of Madhya Pradesh and thus the project must be terminated in public interest. The Andoaln exposed the financial irregularities of several hundred crores. The NBA also demonstrated on the basis of facts and the ground reality that there were no arrangements for the rehabilitation and resettlement of 60,000 farmers, workers, Kewats and Kahars affected by the project as per the Rehabilitation policy.   

Raising the aforementioned issues thousands of project affected women and men repeatedly sat on dharnas, demonstrations, fasts, and faced brutal lathi charges and assaults, arrests and jail. The State government and the project promoters instituted hundreds of false cases against the affected people and the activists in Mandleshwar, Khargone, Bhopal and Mumbai including defamation cases. The NBA and the affected people also filed petitions on the issue of rehabilitation and submergence before the National Green Tribunal and the High Court which directed the completion of rehabilitation before any submergence. It is noteworthy that even after 23 years, more than 85 percent of the rehabilitation of the affected people remains to be done.

Maheshwar project always surrounded by scams: Indicted for default and financial irregularities in 5 CAG reports

From the very beginning, there were many financial irregularities and defaults surrounding this project, because of which the work of the project stopped many times, and the work of the project has remained stopped for the last 10 years. Whether Congress or BJP, all governments have attempted to benefit the project promoters at the cost of the public. The apex organisation, the Comptroller and Auditor General of India (CAG) have in as many as 5 of its reports of the years 1998, 2000, 2003, 2005 and 2014, recorded various grave financial irregularities related to the project. In its 2014 report, the CAG of India had clearly questioned as to why the government has not terminated the PPA.   

Apart from this, in 2001, the erstwhile head of the lenders Consortium, the IFCI had clearly stated in its report that the S.Kumars had diverted Rs 106.4 crores of public funds meant for the Maheshwar project to other entities, including its sister concern from the same group. Since the year 2001, the Narmada Bachao Andolan has repeatedly demanded forensic audit of the thousands of crores of rupees of public funds raised by the Shree Maheshwar Hydel Power Corporation Limited for the Maheshwar project. It is noteworthy, as stated in the Order dated 18.12.2020 that the National Company Law Appellate Tribunal has directed a forensic audit of the SMHPCL under the supervision of the officials of the CAG of India, thus vindicating the long term concerns vociferously by the NBA about financial irregularities, fraud and corruption in the Maheshwar project.

PPA termination stops loot of Rs 42,000 crores of public money

The 400 MW Maheshwar project is slated to generate a mere 80 crore units at over Rs 18 per unit, whereas after meeting the entire demand of Madhya Pradesh surplus power of 3000 crore units is available. Also today power is available at Rs. 2.5 per unit. But as per the PPA for the Maheshwar project, even if the State government does not purchase the abnormally expensive Maheshwar power, it would still have to pay around Rs 1200 crore rupees per annum, or a whopping Rs 42,000 crores in 35 years. Thus, it is clear that Rs. 42,000 crores belonging to the public of Madhya Pradesh would have been looted due to the PPA even without purchase of electricity from this project, a situation which has been rectified by the termination of the PPA.

Stop loot of public money in the name of privatisation of public infrastructure

The Maheshwar project is a blatant example of the loot of public money in the name of privatisation. The real object of starting this unviable project was loot from the word Go, which NBA opposed with all its strength, in the face of repression. The stated basis of the privatisation of the project was that the project promoters would get substantial private funds from their own sources, and the cost of power to be sold in the open market would be competitive and low. However, the reality is that the Maheshwar project has been financed mostly by money belonging to the Indian public, raised from Indian banks and financial institutions, and the cost of power has been very high due to the financial irregularities, and the anti-people power purchase agreement. After taking thousands of crores of public money in the name of building the Maheshwar project, the promoters diverted monies to their own group companies among others. When S Kumars defaulted from paying the bondholders who had extended debt to the project, the State government was forced to pay them Rs 102 crores. All governments were part of this loot. It is clear that privatisation neither is a guarantee of competitiveness or efficiency nor does it bring in additional private resources into the development process. All that it does is bring thousands of crores of the money saved by ordinary people into the hands of a few corporates who use the corporate veil to misuse the public funds, and shield themselves from transparency and public accountability.  

The NBA calls on the governments to bring back all the public money and stop the privatisation of public infrastructure.

Click here for Termination order; Termination order PPA

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