APPENDIX 1
Memorandum from the South Asia Network
on Dams, Rivers and People
1. South Asia Network on Dams, Rivers and
People is working on the issues around large dams and alternatives.
We have been following the issues around international financing
of large dams. Together with a number of other groups internationally,
we have been researching the environmental and developmental impacts
of the projects and programmes backed by OECD export credit and
investment insurance guarantee agencies (ECAs). We greatly welcome
your Committee's invitation to NGOs and others in the development
community to submit memoranda on the future role and status of
the ECGD in order to feed into the review of the ECGD announced
by the Secretary of State for Trade and Industry in late July
this year.
2. The ECGD's lack of mandatory environmental
and development standards is of great concern to us. Whilst agencies
such as the ECGD continue to operate without such standards, there
is strong pressure on other national ECAs to resist taking action
to improve their own standards. The result is a race to the bottom
that penalises "best practice" and erodes public confidence
in the stated commitment of governments to sustainable development.
We believe that the problem will remain unaddressed so long as
the OECD fails to require its ECAs to adopt shared, common standards
and procedures aimed at ensuring rigorous, comprehensive, accountable
and transparent environmental and development screening and assessment
of those projects and products for which ECA support is sought.
3. A case in point is the Nathpa Jhakri
Hydro project in India, part funded by ECGD. UK ECGD support for
the Nathpa Dam on the Satluj River in Northern India was announced
in 1996. The ECDG is providing a £22.85 million guarantee
for a loan by Barclays Bank PLC to Kvaerner Boving Ltd, the lead
contractor for the project. The press clippings attached[1]
show how poorly planned the project is and it is difficult to
understand how ECGD decided to fund this project. It is due to
such funding that ECGD provides that, that unjustifiable projects
like NJHP gets taken up and then inevitable financial burden falls
on the unsuspecting citizens of this developing country. While
submitting this to the Committee for its consideration, we very
much hope that the Committee will support the call for common
international standards and press for the ECGD to take a lead
in adopting such standards.
South Asia Network on Dams, Rivers and People
23 August 1999
Annex A
Indian Express, Saturday, May 2, 1998
DAM TRAPPED
IN A
TRAGEDY OF
ERRORS
Pranjal Sharma
NEW DELHI, May 1: You could call this the height
of error. One of the largest hydro-electric projects of the country
is stuck for the last four years because Government agencies made
crucial errors while calculating the height of the dam.
When a road, bridge or a dam is built, nobody
questions the accuracy of maps and measurements done by Government
surveyors. And when building a power plant, few question the figures
offered by an experienced electricity board. But is was the mistakes
made by such organisations which have brought the 1500 MW Nathpa
Jhakri Power Project near Shimla near closure.
After 13 years spent in getting various clearances
and approvals, its viability will now be determined by the speed
at which the Union Ministry of Power, the Himachal Government
and Central Electricity Authority (CEA) can decide on the immediate
issue of the final height of the dam.
When the Nathpa Jhakri Power Corporation started
executing the civil contractors for building the dam in 1994,
it discovered that there was a measurement error of two metres.
The actual depth of the site where the wall was to be built was
two metres below the actual figure given. The Himachal Pradesh
State Electricity Board which is a joint venture partner in NJPC
did its own bit adding a calculation error of two meters in the
height of the dam to be built.
As a result, the dam is going to be four metres
shorter than the original figure of 60.5 metres. As a result of
these horrendous errors, the maximum power which could be produced
by the dam has almost halved. In the original plan, the dam was
expected to produce three hours of peaking power which means that
it would generate the maximum power possible for three hours running.
But now it will be able to generate peaking power of only 1.6
hours in the morning and the evening.
Also, the cost of the project which is part
funded by the World Bank has risen from Rs 1,678 crore (at 1988
prices) to Rs 4,337 crore in 1993 (when revised estimates were
made) to a current figure of Rs 7,179 crore (assuming that the
dam gets on with its work and is commissioned by 2001).
The obvious solution to this problem was to
raise the height of the dam. But the NJPC ran into another problem
on this front. A few km upstream on the Sutlej river, the HPSEB
has an 120 MW dam at Bhaba. The HP Government said that if the
height of NJPC's dam is raised, the water from the resulting reservoir
would choke the flow of the water from Bhaba. Since then the Government
of HP has refused to budge an inch, while the Government of India
and NJPC have been trying to resolve the issue.
Meanwhile, the World Bank has been putting pressure
on the Power Ministry to expedite the project. WB has lent $437
million (at 1989 prices) to the project. The Government of India
sought and received an extension of the World Bank loan till end
of this year. The only condition is that the clearance from the
public investment board on the revised costs be taken by October
this year.
The Power Ministry and the CEA are now going
to take a decision on the height of the dam. Ministry sources
say that the decision will be taken by May. Sources close to the
projects say that any further delay could well kill the project.
The World Bank could also get fed up and pull out. They say that
reduced peaking power will not hurt the viability of the project
and the cost of power will work out to Rs 2.10 per unit, lower
than comparable projects.
World Bank to terminate $437 million to
NJPC
Source: The Hindustan Times, Oct. 9, 1998
NEW DELHI,
OCT. 8 (BY
K. A. BADARINATH)
The World Bank has decided to terminate the
US$437 million loan to the State-owned Nathpa Jhakri Hydro-Electric
Power Corporation (NJPC) midway thereby jeopardising the future
of 1500 MW hydel project being executed by the company in Himachal
Pradesh.
Highly-placed Finance Ministry sources said
that several reasons were being cited by the multilateral funding
body for this termination including the time-cost overruns, industrial
unrest dogging the company and also a major dispute on height
of the dam being put up by the NJPC.
While the NJPC has already utilised US$300 million
in the mega venture, the bank has communicated to the Finance
Ministry as well as NJPC its decision to terminate the loan. The
project which was expected to be commissioned by December 1998
is running behind schedule by around four years.
The revised project cost of Rs 4,338 crore has
shot up to over Rs 7,500 crore thereby forcing the bank management
to take a stringent stand on the project. Despite the fact that
the electrical equipment prices worldwide have taken a sharp decline,
the project costs have gone up raising several questions.
The NJPC management has now moved the Public
Investment Board (PIB) to get its approval for revision of costs
to over Rs 7,500 crore and the commissioning schedule to 2002
AD. Some of the Finance Ministry officials apprehensive about
the projections made by the NJPC management.
According to a specific communique from the
World Bank, its on-going loan will automatically lapse in case
the PIB clearance is not obtained within this month end. Once
this loan is terminated any fresh loan negotiation with the World
Bank for completing the project would run into rough weather given
the fact that following US sanctions slapped on India none of
the power projects related loans are being cleared.
Further, the World Bank has refused to extend
the on-going loan "indefinitely".
The NJPC is a 75:25 joint venture of the Union
Government and Himachal Pradesh respectively. Out of the total
approved cost of Rs 4,338 crore, Rs 2,200 crore is expected to
be pitched in by the Union Government and Himachal Pradesh towards
their respective equity.
Along with the World Bank's US$437 million loan,
a consortium of foreign banks are participating in the project
by lending Rs 1,200 crore. Barclays Bank (UK), Bank Nationale
De Paris Norvic Investment Bank (Finland), KFW of Germany and
SBC from Switzerland are part of this consortium.
The financial applecart will be disturbed with
the massive time and cost overruns that are being reported by
sources in the NJPC.
As a direct fall out of the enhanced project
costs, the generation cost will go up from Rs 1.22 to Rs 2.29
per Kwh. per unit power cost is bound to go up further in case
the World Bank does not make available fresh loan after having
terminated this loan in December 1998.
Further hike in power cost will be due to possible
high-cost open market borrowings the NJPC will have to be made
in the international debt market.
Alternatively, both centre and Himachal Pradesh
will have to pitch in more funds through equity which seems remotely
possible.
Already the Himachal Pradesh has Rs 75 crore
worth equity dues that need to be paid to the NJPC.
Another major issue is that of dam height which
is being reduced from earlier projection of 67 to 60 metres thereby
having an adverse implication on projected power costs, availability
of peaking power and energy as such.
As against initial projection of 3-hour availability
of peaking power, it will now be available only for1.5 hr per
day. This, in essence will defeat the very purpose of setting
up a hydel project which is expected to meet the peaking demand
in Northern States.
As the Himachal Pradesh Government has expressed
apprehensions that the 67 mt height of the NJPC project would
inundate the head-race tunnel of the already existing 250 MW Sanjay
Bhaba hydel project, the dam height is being revised mid-way.
Wapcos, which was appointed as a consultant
to the NJPC, has recommended reduction in the height of the dam.
Sources stated that the very fact that mid-way correction in dam
height is being contemplated speaks volumes on the initial projections,
dam design and related equipment orders placement.
The demand of over 1,800 employees co-opted
from HPSEB for wage parity with direct recruits of the corporation
has rendered the project all the more uncertain. This has been
one of the issues pointed out by the World Bank while justifying
its decision to terminate the loan to Natapa-Jharki hydel project.
1 Annex A. Back
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