Experts pick holes in J&K’s signing MoUs with NHPC for hydro power projects

Amanda Bullock / February 20,2021

Srinagar: On 4th of June 2018, Sunil Sharma the then Minister for Power in the PDP-BJP coalition government announced, “I am hosting (first-ever) global investor meet for harnessing the huge hydro power potential of J&K”.
Two-and-half years down the line no global investor has come and Kashmir “scandalously” remains one of the energy-deprived hotspots in the subcontinent.
Interestingly, the water res of the erstwhile state continue exclusively to be kept open for exploitation by National Hydroelectric Power Corporation (NHPC), a profitable hydropower public sector enterprise of the Government of India.
Instead of following a policy of creating its indigenous hydle power assets, the rulers have religiously followed a “guide book” of endowing the water res of Jammu and Kashmir to the NHPC.
Following the Doctrine of Stare Decisis, six weeks ago the present administration announced to have attracted an investment of Rs 35,000 crores to tap the water res of the union territory.
Calling it a historic moment towards energy sufficiency in Jammu and Kashmir, the administration signed memorandums of understanding (MoU) with NHPC for construction of five mega hydro power projects.
The projects include 850 MW Ratle, 930 MW Kirthai-II, 240 MW Uri -II and 258 MW Dulhasti-II besides 1856 MW Sawalkot HEP, a project initiated under state sector in 1984.
But 70 percent (approximately) of this investment of Rs 35000 crores is meant strictly for the projects which shall be owned entirely by NHPC and J&K shall have no stake in them.
These hundred percent owned NHPC projects include 1856 MW Sawalkot, 240 MW Uri -II and 258 MW Dulhasti-II.
In the interest of the nation, Jammu and Kashmir has to provide its land and water res besides tax exemptions for this NHPC investment. In return it shall get some water usage charges plus 12 percent free power.
This ratio of royalty was initially fixed in 1978 for 690 MW Salal, the first hydropower project built by the union Ministry of Power in Jammu and Kashmir. It was later handed over to NHPC.
No local government in the past 43 years has had the strength to get this “disrespectful” proportion changed. Consequently the percentage remains invariant for all the NHPC projects in J&K till day.
For the remaining two projects the 850 MW Ratle and 930 MW Kirthai-II, a joint venture course through Chenab Valley Power Projects Ltd (CVPPL) has been opted by the union territory government.
JK (State) Power Development Corporation (JKSPDC) and NHPC have 49 percent share each while as Power Trading Corporation (PTC) has two percent shares in the company.
In the meantime (four days ago) NHPC has approved the proposal for taking over of 2 percent equity share of PTC in the CVPPL.
After failing to invest on its own in the 850 MW Ratle, the government has “gifted” the project to NHPC, via the joint venture, said a senior Power Development Department (PDD) officer, wishing not to be identified.
The erstwhile state government had signed agreement with GVK Power and Infrastructure Limited, in 2010 for construction of this project at an estimated cost of Rs 6400 crores.
It was the first hydropower project in of Jammu and Kashmir awarded on a tariff-based international competitive bidding procedure.
Besides getting 16 percent free power from the project, J&K had the first right of purchase for 55 percent of the power generated by this GVK owned plant at Rs 1.44 per unit.
It was also to be transferred to J&K after 35 years of operation.
Failure of the government in providing enabling environment to GVK, forced the company to abandon the project midway, said Shakeel Qalander of Kashmir Center for Developmental Studies (KCDS), a civil society group.
A government official told this newspaper that some other issues including water usage charges and tariff arguments had also propped up between the state government and GVK.
The issues could have been sorted out but the PDP-BJP government in February 2017 terminated the contract to the company, the official said.
Commenting on handing over the project to NHPC via CVPPL, Sheikh Ashiq, in-charge of the Kashmir Chamber of Industries and Commerce said “generally 70 percent of the costs in all infrastructure projects are debt financed.
“Why JKSPDC is unable to seek finance from lenders is beyond my comprehension?” he said.
Power Finance Corporation of India, J&K Bank, State Bank of India, the National Banking Consortium and the international financial institutions like ADB, according to experts, are the options available to Jammu and Kashmir.
However, Sheikh Ashiq is appreciative of the government for offering equity to J&K as grants in the Rs 5,281.94 crore Ratle project. He hopes the NHPC investment will at least help lessen the rising unemployment rate in Jammu and Kashmir.
However, the NHPC, according to KCDS, has a dismal record in engaging J&K residents for scale one and two posts.
“It hires some local laborers, peons and orderlies and lays them off when the projects are completed,” said Shakeel Qalander.
Experts also point to another concern: “Building reservoir-based hydro projects here — and the fact that J&K lies in the high seismic zone, this region faces perpetual threat of being submerged in case of the breach of the dams during seismic activities,” some experts say.