Shree Maheshwar hydel project: Two decades of no progress

The 400-Mw Shree Maheshwar hydel project, the first privately promoted one in Madhya Pradesh, is likely to be transferred to a government-owned company, assuming one is willing to take it on.

No government utility or agency is willing to support it, after 23 years of a tussle still unresolved. Established in 1993 and promoted by MW Corp (erstwhile S Kumars), it was to sell power at Rs 2.64 a unit. After constant delay, the project cost is estimated a Rs 6,700 crore, a fourfold rise for what was originally envisaged, and the rate of supply close to Rs 11 a unit.

And, the state government is not willing to revise its power purchase agreement (PPA) any further. Rajendra Shukla, minister of energy, told Business Standard: "In any case, we will not buy power from Maheshwar at more than Rs 5.32 a unit."

The promoters had been issued a notice of default for cancellation of the PPA by Madhya Pradesh Power Management Company (MPPMC) in November 2012. A consortium of lenders led by Power Finance Corporation (PFC), Hudco, Rural Electrification Corporation and several state-owned banks had infused close to Rs 2,200 crore in the project.

A committee was formed in October 2014 under the state's additional chief secretary to iron out problems between the private developer, lenders and MPPMC. The option placed before it were of fresh equity infusion by the developer, handing over to a central public sector unit (PSU) if this didn't happen or termination of the existing PPA.

To queries from Business Standard, the promoter company said it had already "arranged $150 million as equity from a highly qualified, BBB-rated international investment firm, which is to be used for completion of rehabilitation so as to enable the project to commence generation of power."

It said the proposal was given to PFC well within the stipulated time, in accordance with the committee report. August 2 was the last date, officials in the Union government said. However, "not a single penny has been received in the 'trust & retention account' managed by State Bank of India for PFC," said an official.

Since the promoters did not manage any fresh equity, there is strong likelihood of the project going to a government company, such as NHPC or NHDC. NHDC is a joint venture of the MP government and NHPC, which has completed two major power projects, the 1,000-Mw Indira Sagar and the 520-Mw Omkareshwar project.

"The Union ministry of power would now take a final decision. The terms of the committee recommendations however clearly state that any default now would lead to project being give to a PSU," said a senior government official, requesting anonymity.

NHPC, however, is reluctant to take on the project, due to controversies involved and poor progress on relief and rehabilitation (R&R) measures by the current promoter. The project, part of the Narmada Basin Development Plan of the state government, has been in controversy since inception. Narmada Bachao Andolan (NBA) has also been protesting against the project, asking for a re-survey of the proposed submergence. As many as 9,400 families would be affected.

"R&R is the biggest issue with the project. If NHPC or NHDC has to infuse capital, it would require at least Rs 2,000 crore, half of which would go to rehabilitation," a senior NHPC executive told Business Standard.

THE JOURNEY

1992
Project was awarded to erstwhile S Kumar Limited

OVER THE YEARS

• The civil work on the dam had been complete
   
• Three turbines were readied for generation and were commissioned shortly (from company's website)
   
• Narmada Bachao Andolan opposed the project, had written to MoEF on the submergence that the project would cause.
   
• Project cost increased by 6 times, tariff from Rs 2.6 to Rs 11 per unit

2012
MP Government cancels PPA

2014
Committee for bailing out project formed, asked that either promoter should infuse equity or project goes to PSU

2015
Company claimed to have arranged equity of $150 million but central government denied getting any