Asia Times: Indian power projects darkened by lack of transparency



	December 17, 1999	atimes.com

India/Pakistan

Indian power projects darkened by lack of transparency
By Ranjit Dev Raj

NEW DELHI - India's ''fast-track'' privatized power projects are rapidly gaining a reputation for lack of transparency and for bending over to the interests of transnational corporations (TNCs) rather than consumers.

Evidence of overt accommodation of TNCs was available in Parliament, Thursday when Power Minister P R Kumaramangalam announced central government counter-guarantees for the controversial 1000 megawatt Mangalore Power Company (MPC) project in southern Karnataka state. Kumaramangalam was hastening to meet one of the conditions placed by MPC's promoters, the United States-based Cogentrix and Hong Kong's China Light and Power Corporation (CLPC) on December 15 for reversing a decision made a week ago to pull out of the $1.3 billion project.

Curiously, within four days of the dramatic pullout announced by Cogentrix chief Ron Somers, the Supreme Court quashed a judgement by the Karnataka High Court ordering police investigation into charges of bribery by the TNC.

Another condition placed by Somers was for time-bound commitments to resolve outstanding issues while sticking to the terms and conditions of a 1997 deal with the Karnataka government - which many fear will hit consumers. Counter-guarantees by the central government assure private power producers full realization of their stated investment from the sale of power to the concerned state electricity board - but costs are passed on to consumers.

In western Maharashtra state, counter-guarantees given to another US-based power giant, Enron, have resulted in power becoming unaffordable for ordinary consumers while questions are being asked about actual costs of the project. The Enron saga is, in fact, the subject matter of a recently released book ''Power Play'' in which energy analyst Abhay Mehta records the many rules flouted to accommodate Enron's plant at Dabhol at the cost of consumers and the exchequer.

Says Girish Sant, energy specialist for PRAYAS, a Maharashtra-based NGO, ''It is bad that this country takes over half a decade to finalize fast-track projects but this is bound to happen when contracts are signed in secrecy.''

''Some of the TNCs may find themselves at the receiving end of the process now but in the end it is the public which is going to face the brunt of higher tariffs in the future for non-competitive, non-transparent contracts.''

Objections to Kumaramangalam's offer of counter-guarantees to Cogentrix has already come from Congress party leader and former power minister S B Chavan who has demanded that terms and conditions for fixing power tariffs be made public.

The MPC in Karnataka and Enron's Dabhol Power Corporation in Maharashtra were two of eight fast-track projects approved as part of ambitious liberalization plans begun in 1992 by a Congress administration.

While Enron inaugurated its first phase 740 megawatt earlier this year, Cogentrix and its junior partner China Light and Power got bogged down with numerous public interest litigations filed by environmentalists against the location of the MPC.

According to Leo Saldanha, campaigner for the Karnataka-based Environment Support Group the MPC would adversely affect fishing and agricultural communities in the environmentally fragile Mulki river estuary. Although the Environment Support Group's contentions were endorsed by the central government's National Environmental Engineering Research Institute (NEERI), they were thrown out by the courts.

What did stick were charges of bribery made in a public interest litigation filed in the Karnataka High Court by consumer activist Arun Kumar Agarwal alleging offshore payments by China Light and Power to government negotiators.

But four days after Cogentrix and China Light and Power announced their pullout December 9, the Supreme Court, which earlier stayed investigations ordered by the high court, quashed Agarwal's petition. The Supreme Court even censured the subordinate court saying that it had made ''a blind shot fired in the dark without knowing whether there is a prey at all''.

''The High Court has looked at different circumstances in the case with jaundiced eye . . . We think the High Court has gone too far,'' a two-man bench of the Supreme Court observed.

Meanwhile, British energy giant PowerGen has followed Cogentrix's example in threatening a pullout of a 500 megawatt power project at Bina in central Madhya Pradesh threatened by litigations over escrow cover. ''The threat is serious . . . India should not believe that foreign investors have no choice. In fact, there is worldwide competition for foreign investment,'' British Deputy High Commissioner Michael Bates was reported saying at a public meeting in Madhya Pradesh, Wednesday, by newspapers.

The Congress party Chief Minister of Madhya Pradesh, Digvijay Singh responded to Bates by saying that his government would ensure that litigation over escrow would be ended at the earliest opportunity.

Singh admitted that several power deals had been signed hastily in a bid to attract foreign investment in new power projects. ''Instead we should have gone in for privatization of existing projects,'' he said to The Asian Age.

Hit by acute power shortages since the early part of the decade, India is in the process of following World Bank advice that the state electricity boards should be completely ''restructured'' through ''privatization''.

State electricity boards have accordingly been steadily starved of plan investments and forced to depend on private investors who have been pampered with relaxations in customs duty and ''negotiated contracts''.

The new right-wing Bharatiya Janata Party (BJP) government has further pursued a policy of denying electricity boards funds from the profitable urban distribution business as well.

Eastern Orissa state signed an agreement with the World Bank in 1994 under which electricity supply was to be completely privatized in return for a loan of $450 million.

Madhya Pradesh approved India's first privately owned hydro- electric power plant, the 400 megawatt Maheshwar Hydel Project in the Narmada Valley, promoted by S Kumar a textile manufacturer.

However, the Narmada Bachao Andolan (NBA) or Save the Narmada Movement has launched a campaign on behalf of thousands of villagers whose rich farm lands are due to be inundated by the dam without hope of due compensation. Last month, NBA activists and villagers from the valley demonstrated in front of the German embassy to protest against plans by two German banks to provide funds worth $125 million for machinery that would go into the dam.

Sustained agitations by NBA had earlier forced major banks such as the US-based Bechtel and PacGen and the German Bayernwerke and VEW Energie to back out of Maheshwar after conceding that the project violated human rights. Said NBA activist, Shripad Dharmadhikari: ''The time has come when foreign investors in the power sector know that it is best for them to be transparent and take the public into confidence.''

Despite the risks, there is no dearth of investors in India's vast and potentially lucrative power sector. The US-based Ogden Energy stepped in this week with $2 billion to pick up 49 percent stakes in the Maheshwar Hydel Project.

(Inter Press Service)