M.P. threatens to cancel pact on Maheshwar dam

March 20, 2013 12:00 am | Updated 05:12 am IST - New Delhi:

Observing that Shree Maheshwar Hydel Power Corporation Ltd. (SMHPCL), the private promoters of the Maheshwar dam project, had failed to begin commercial operation and had no funds to complete the project and rehabilitate the displaced, the Madhya Pradesh Government has threatened to terminate the project’s power purchase agreement.

A notice of default, a copy of which is with The Hindu , was issued by the MP Power Management Company Ltd (MPPMCL) in November last year but came to light only last week. It provided a 60-day window to SMHPCL for explanation, failing which MPPMCL threatened to terminate the power purchase agreement of the project.

The 400-MW Maheshwar dam, India’s first privately financed hydroelectric project in Khargone district, is one of several big dams being built over the Narmada.

The power purchase agreement (PPA) for the dam was signed between the State Government and SMHPCL on November 11, 1994, while an “Amendatory and Restated Agreement (A&RA)” was signed on September 16, 2005. According to the A&RA, the Commercial operation Date (CoD) of the project should have been four years from 09.03.2006. This four-year window expired on 08.03.2010.

“Unfortunately the project has yet to achieve its CoD till date,” the notice reads. “Further, the project activities are at a standstill and no funds seem to be available for the completion of the project as also for the R&R activities. M/s BHEL, the EM contractor, and M/s SEW Constructions, the civil contractor, have withdrawn all their personnel from the site on account of pending payments,” it says.

The notice gave an additional 18 months to the promoters to get their act together by treating the stoppage of work by the Union Ministry of Environment & Forests (MoEF) as a force majeure event.

“The stoppage of work by the Ministry of Environment & Forests...from 02.04.2010 to 19.05.2011 can be treated as force majeure .... taking into account [this period], the trigger date [for initiating termination of PPA] would be 27.10.2012,” the notice says.

However, the notice says “even by this date, i.e., 27.10.2012, you have failed to achieve Commercial Operation Date.”

“...SMHPCL is... informed to consult MPPMCL in this regard within a period of 60 days... in case of failure in strict compliance of this ‘Notice of Default,’ MPPMCL shall be constrained to terminate the PPA,” it says.

Narmada Bachao Andolan (NBA) leader Alok Agarwal told The Hindu that it “welcomes this step taken by the M.P. Power Management Company and the State Government towards cancelling the PPA of this high-cost and unviable project.”

“Power from the Maheshwar project is slated to be so expensive that an additional burden of Rs.20,000 crore would fall on the electricity companies and the State Government. Thus it is imperative in public interest that the PPA be cancelled,” he said. “The project is slated to generate only 823 million units of power, which is a small proportion of the 50,000 million units required for the State. The project is no remedy for electricity problems of the State.”

However, SMHPCL said it did not violate any condition of the PPA. “The notice was served to the company on November 5, 2012. The company replied within 60 days on January 2. The company is of the view that we have not violated any clause of the PPA,” said the company in an official statement.

Default notice was slapped on promoters in November

They have no funds to complete the project: Government

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