New Delhi: The Arunachal Pradesh, Uttarakhand and Himachal Pradesh governments are not only accepting advance payments from developers of hydroelectric power projects before they receive mandatory environmental clearances, but are also diverting a part of that money, which should be used to rehabilitate people displaced by the hydro projects, elsewhere.
The practice has come in for criticism from the Union power ministry because state-owned firms developing hydro projects cannot usually make such advance payments and, because, when the payments are made, they are to be used to fund rehabilitation efforts.
Cash Before Delivery (Graphic)
Hydro projects take a significant toll on the local environment and populace, and require some amount of displacement of people.
“The state governments do not make use of the money for the development of the project-affected people, but use it for other purposes. This practice should stop,” said a senior Union power ministry official who did not wish to be identified.
Arguing similarly, Jairam Ramesh, minister of state for power and commerce, said: “The concept of initial advance puts the public sector companies at a disadvantage. I am also concerned at the rapid pace at which the projects are being awarded in Arunachal.”
The north-eastern state of Arunachal Pradesh is in the centre of the controversy because it boasts the most potential for hydropower generation in the country.
The total hydropower generation potential of the north-eastern states and Bhutan is about 58,000MW. Of this, Arunachal Pradesh alone accounts for 50,328MW, and has attracted several private sector hydro project developers such as Reliance Power Ltd, Jaiprakash Associates Ltd and DS Constructions Ltd.
The refusal by NTPC Ltd, a public sector firm and India’s largest power generation company, to pay an advance has led to the Arunachal Pradesh government threatening to cancel a contract to develop projects at an estimated cost of Rs22,500 crore. The state government wants NTPC to pay Rs5 lakh per megawatt as the upfront payment for the two projects at Etalin (4,000MW) and Attunli (500MW), as reported by Mint on 19 February 2008.
In the case of the Dibang hydropower project in Arunachal Pradesh awarded to NHPC Ltd, which is yet to receive environment and forest clearances, the state government has accepted Rs225 crore as advance payment and has used it to revive the ailing Arunachal Pradesh State Cooperative Apex Bank. However, T. Norbu, Arunacha Pradesh’s power secretary, defended the state’s move and said the decision was taken after “discussing the issue with NHPC, the finance ministry and the Planning Commission”.
“NHPC, being a public sector firm, paid the money as a special case,” he said. “All this money comes to the state exchequer as state revenues. The rehabilitation and resettlement in the project-affected area has to be done by the developer as per the project agreement and the Electricity Act, 2003,” Norbu added.
“We accept a premium or upfront payment from the hydropower project developers. We also charge an advance against free power. While we charge a part of this upfront payment immediately, the balance is collected later. This amount goes to the state exchequer and a part (of it) is used for the development of the project-affected people,” said Shatrughan Singh, Uttarakhand’s power secretary.
Ajay Mittal, power secretary, Himachal Pradesh, could not be reached for comment.
Activists have challenged the practice.
“The Arunachal Pradesh government receiving huge monetary advances for hydropower projects which have no environment and forest clearances compromises the legally mandated environmental decision-making process. These projects are coming up in an ecologically and culturally sensitive region and require thorough scrutiny for their environmental viability. Even though the Central government (MoEF) grants the clearances, the state government plays an important role in the clearance process,” said Neeraj Vagholikar of Kalpavriksh, an activist group that works on environment and conservation issues.
Explaining the project approval process, Norbu said: “The first-stage clearance for the projects have been obtained by many companies to whom projects have been awarded, and (for which they) are conducting survey investigations. After the survey investigations are over, the detailed project report will be prepared, followed by a public hearing. After a public hearing is done, the final clearance will be provided followed by the clearances from the Central Electricity Authority and Public Investment Board.”
According to the policy of the Arunachal Pradesh government, companies winning projects having a generation capacity of 100-500MW need to make an upfront payment of Rs1.5 lakh per megawatt. It is Rs2 lakh per megawatt for projects having capacities between 500MW and 1,000MW, and Rs3 lakh per megawatt for projects above 1,000MW.
“The public hearings for the Dibang project saw almost cent per cent (total) opposition from the locals as an advance has been taken without consulting the public. There is a valid concern that these processes will be merely cosmetic exercises as the state has already taken an advance amount from the company. They feel that the state government receiving this money before the public consultation process is completed and mandatory clearances are received, amounts to the government mortgaging people’s lands,” added Vagholikar.
“There are a lot of problems with the hydro projects. It does not get easier as they are a state subject. Relocation and resettlement is a big problem and should be taken care of,” said Kirit Parikh, member, energy, Planning Commission, in an earlier interview.
Arunachal Pradesh has awarded projects totalling 26,800MW in the past 30 months alone.
“We award projects in a transparent manner and we plan to award around 15 projects more with less than 100MW (capacity each) shortly,” Norbu said.