Contract awarded projector Rs 42,000 crore of public money in 35 years even if no electricity purchased
The Madhya Pradesh government has cancelled all contracts with Maheshwar Hydroelectric Project almost three decades after it agreed to purchase power from it. The project had a poor financial track record, several irregularities and graft allegations and caused the submergence of 61 villages.
The company also allegedly failed to provide proper resettlement to all the 9,500 families affected by it.
The Maheshwar dam is one of the large dams of the Narmada Valley Development Project, which envisages the construction of 30 large and 135 smaller dams in the Narmada valley. The privatised hydroelectric project of 400 megawatts capacity was coming up in Madhya Pradesh’s Khargone.
Madhya Pradesh Chief Minister Shivraj Singh Chouhan September 27, 2022, announced the cancellation of all agreements with Shree Maheshwar Hydel Power Corporation Ltd. The approval was given in a cabinet meeting.
The contract for the hydroelectric plant was granted to a company under S Kumars Group. The state government had signed a power purchase agreement with the company in 1994, which was revised in 1996.
The project ran into trouble in 1999 when several German companies that were collaborating on the project backed out. The project estimates also shot up. The estimated cost of Rs 1,670 crore shot up to over Rs 3,000 crore by 2011.
The project was marred by several controversies of financial irregularities, which were also pointed out by Comptroller and Auditor General of India reports. CAG exposed serious corruption charges against the Maheshwar project in five reports in 1998, 2000, 2003, 2005 and 2014.
The 2014 CAG report had suggested terminating the project for undue delay in its completion.
Residents of 61 villages had been fighting against the project under the social movement Narmada Bachao Andolan for the last 25 years.
The construction work was repeatedly interrupted because of corruption charges, said senior activist of NBA Chittaroopa Palit. “The work was stalled for 12 years,” she said.
The projector S Kumars had also allegedly diverted Rs 106.4 crore from loans granted by various banks and government institutions for the Maheshwar project to another company of the same group, the Industrial Finance Corporation of India said in a 2001 report.
Protestors had alleged that there was no need for the project, which was wasting the taxpayers’ money. MP has over 3,000 units of electricity in excess after meeting its current needs and currently, power is available at Rs 2.5 per unit.
The Maheshwar Hydroelectric Project was to supply just over 800 million units of electricity, whose cost would have come to around Rs 18 per unit, said the order issued now.
NBA had repeatedly demanded a forensic audit of the public money received for the project.
However, the government would have to pay about Rs 1,200 crore every year for 35 years to the projector, even if no electricity was purchased, according to the power purchase agreement. Around Rs 42,000 crore of public money would have gone out of taxpayers’ pockets in 35 years, even if no electricity was purchased.
This is a historic victory for our struggle, senior activist Alok Agarwal told Down To Earth. Agarwal had been a part of the protests against the hydroelectric project. “The government had to admit that we were right and they were wrong,” he said.
The cancelled contracts are the power purchase agreement of November 11, 1994; power purchase agreement amendment and implementation agreement of May 27, 1996; rehabilitation and resettlement agreement February 24, 1997 and amendatory and restated agreement of September 16, 2005.
The state government’s guarantees and counter guarantees attached to these agreements have also been cancelled.
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