NHPC issue: new facts, new fiction Now that the counter argument is that of sovereignty, economics is on a sticky ground The transfer of J&K’s power projects from NHPC to the state seems going nowhere. The civil society campaign for mobilising public opinion to support the transfer seems to have hit the wall. Ironically, as the Assembly election season comes close, the ruling coalition seems soft pedalling the issue. The opposition parties seem to prefer the status quo for now. The trouble with the status quo is that it is extremely harmful. As new revelations about NHPC’s relation with the state come by, the rationale of the status quo needs to be questioned. The most troubling aspect of this situation is that J&K state’s public finances are entering into a situation of unmanageability. One can bet hardly anyone dealing with the state’s finances in Srinagar and New Delhi has any idea about how to fix this situation in the long term. All that is on the table are desperate short-term quick fixes. And then there are the red herrings, herrings, which help in diverting people’s attention from the core issues. The issue of water user charges levied on NHPC for using the state’s water in its hydel projects in the state is turning out to be one such red herring. It is increasingly clear now that contrary to some expected gains, J&K’s people are net losers with the levy of this “tax”. According to latest information available, prior to water use charge, the per unit tariff for Salal Power Project was Rs 0.66, Rs 1.70 for Uri, Rs 5.12 for Dulhasti and Rs 4.78 for Sewa II Project. Post water charges the tariff has been increased to Rs 1.89 for Salal, Rs 2.20 for Uri, Rs 5.70 for Dulhasti and Rs 5 for Sewa II. Interestingly, this increase in tariff has resulted in rise in J&K’s power purchase cost to Rs 429.54 crore compared to Rs 298.54 crore without water charges, meaning an increase of 43.88 per cent. Since J&K Water Resources (Regulations and Management) Act 2010 was implemented, Power Development Department has been charged an additional Rs 317.38 crore. This burden has been conveniently transferred to the consumers in the state. So, essentially, NHPC hasn’t been charged anything. All we have done is make power dearer to us in the process. This conclusion is not without a basis. NHPC’s tariff calculation formula is classical: it uses a debt-equity ratio of 70:30, interest at 10 per cent, depreciation by straight line method, interest on working capital at 10 per cent and return at equity at 16 per cent. Therefore, payment of water usage charges to J&K government does not come outside of this standard formula. We have often been told that the J&K government is aiming to keep aside this “water tax” money for the development of future hydel projects of the state. So do we keep our fingers crossed? All this again brings us to the same old question: what on earth empowers NHPC to take such unilateral actions. For an answer to this question, a revisit to history will not be completely futile. NHPC started operating in J&K in 1978 when it took over as the caretaker of Salal Hydero Power Project from Central Hydroelectric Project Control Board (CHPCB). We are told that the J&K Cabinet order No 328 of 21st June 1975 is fundamental to J&K state’s relation with NHPC. That Order, we are told, basically spelt out the terms and conditions of the state’s relation with NHPC. It is a well known fact now that all those good old documents remain “missing.” Rest is history. The interesting life history of Salal Power Project symbolises the situation with almost all other projects NHPC runs in J&K state. So understanding it in the light of some new revelations is important. Salal Project was supposed to be returned to J&K state after the depreciation period in 2003 against a payment of 10 per cent of the project cost. It was also supposed to share power with J&K state on 50-50 basis. In June 2011 NHPC categorically denied having ever entered into any such understanding or agreement with J&K state. And then came the sovereignty question. NHPC is said to have made it clear that it was executing the power projects in J&K under “Indian sovereignty” and that “the Union of India was enjoying sovereign power over the land and waters of J&K.” And so NHPC’s ownership over Salal cannot be questioned, it argued. With this categorical assertion almost all room for negotiation within the ambit of the state’s constitutional relation with New Delhi ends. Salal Project was not transferred to J&K state. The power share of 50 per cent was also never honoured. So what is the cost to J&K state? According to the new available documents, the Salal Project has generated 67,411 MU of energy between 1987 and November 2011. J&K state was supposed to receive 12 per cent free power as royalty plus 35 per cent of power billed at bus bar rate, which comes to 31,686 MU. The fact of the matter is that J&K state has received only 22,883 MU, including the free power. The difference has been purchased at a much higher cost by J&K government – a whopping Rs 2350 crore. The power that the state did not get costs Rs 589 crore. So the state has suffered a clear loss of Rs 1600 crore from Salal Project alone. The loss from other projects is imaginable. NHPC is now getting financial benefits from the Clean Development Mechanism (CDM) and carbon credits trading from J&K’s hydel power projects. According to new information available, Nimzoo Bazgo and Chutak Power Projects are already registered for benefits under the Voluntary Emission Reductions (VERs) scheme. J&K state figures nowhere in that calculus too. With so much of financial loss it is hard to imagine how this state will meet its ends in future. Status quo and silence are clearly no options. The columnist is a consultant in international development and a contributing editor with Greater Kashmir
Posted on: Sun, 09 Jun 2013 04:32:04 +0000
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