The mess in Arunachal Pradesh that no one is talking about

On the eastern edge of India, most often neglected by the national media, Arunachal Pradesh is making headlines for a political crisis precipitated by the dismissal of the Congress government by the governor and the imposition of President's rule in the state.

However, few have taken note of another development which has serious, long-term consequences not just for the border state, but for much of India's North East.

Over the last decade, the state has signed more than 150 memorandums of understanding for hydel power projects, which would make Arunachal home to one of the greatest concentration of dams in the world. Take, for instance, River Lohit. By 2013, six dams were proposed on this river. And the space between them (measured as the distance between one’s wall and the start of the reservoir of the next) was 1 km, 9.5 km, 1.8 km, 3.8 km and 1.8 km. This, despite the lack of studies on what such clustering means for a river – be it in normal times or during quakes and cloudbursts. The Himalayas, remember, are seismically very active.

Despite the environmental concerns, the state did not pull back from the hydel projects, but now it seems the juggernaut might end.

In a delicious twist of fate, a cluster of private companies that rushed headlong into Arunachal in the late 2000s to build hydel power projects are now, in a turnaround, asking the public sector National Hydel Power Corporation to take over their projects.

A news report in Business Standard on Thursday says that “around 17,000 MW of hydropower projects... have applied to the NHPC to either take them over or form joint operational ventures.” The list of people knocking at the NHPC’s doors includes Jindal Power, IL&FS, Lanco and the state governments of Bihar and even Arunachal Pradesh.

Confirming that the group has offered three of its projects – Etalin, Kamala and Attunli – to NHPC, an unnamed spokesperson of Jindal Power told Business Standard: “We are exploring prudent avenues of association to unlock shareholder value and build hydroelectric energy assets for the nation.”

This is a moment of exquisite irony. Just a few years ago, the Arunachal government had taken back the Kamala project from NHPC and handed it over to Jindal Power. This is how the events unfolded.

Power and politics

In May 2000, Kamala and five other projects – with a combined capacity of 20,700 MW – were allotted to NHPC. Between 2003 and 2006, as a report by India’s Comptroller and Auditor General points out, NHPC prepared detailed project reports for each of these. It even sent reminders to the state government, asking it to sign their memorandum of understanding, so that NHPC could start work on the six dams. It didn’t get any response.

Instead, in September 2005, the state took away three projects from NHPC and gave them to Reliance Energy, Jaiprakash Associates and DS Constructions. This set rolling Arunachal’s pell-mell rush to sign hydel power memorandums of understanding with myriad companies that wanted to own dams.

The chief minister at the time was the Congress’s Gegong Apang. He was overthrown in 2007, by his power minister Dorjee Khand, following a no-confidence vote.

According to politicians and bureaucrats in the state, who spoke to this reporter in 2012 on the state’s (by then) non-starter hydel boom, Khandu was allegedly backed by hydel power companies. They claimed that Apang was wary of allowing too many dams in Arunachal Pradesh. He was worried, a local reporter maintained, about the damage to the local ecology and unsure if the state needed to produce so much electricity.

Apang was “happy with the three NHPC and the three other dams coming up on an experimental basis,” claimed a senior government official. And so, he alleged, “Other companies which wanted to enter Arunachal convinced Khandu who then bought out other MPs and deposed Apang.”

Under Khandu, Arunachal’s hydel power MoU-signing spree accelerated. In 2003, when the National Democratic Alliance government at the Centre announced a plan to add 50,000 MW in hydel capacity, it pegged Arunachal Pradesh’s contribution at 27,000 MW. However, between February 2006 and March 2009, the state signed 101 MoUs, adding up to 39,000 MW. By March 13 of 2009, that number had risen to 153 MoUs, totalling 43,118 MW.

CAG's criticism

In the MoU-signing extravaganza, NHPC lost two more projects. In August 2009, Kamala went to a joint venture between a state government company and Jindal Power. Seven months later, it lost the fifth of its six projects – Upper Subansiri – to KSK Energy.

Commenting on the state’s decision to withdraw these projects from NHPC, the CAG was less than flattering. The decision resulted, it said, “in the five projects out of a total six conceived in January 1999 not taking off so far even after a lapse of 12 years even though a large size hydro project as per CEA [Central Electricity Authority] norms takes about 10 years from conceptualisation of a project to its commissioning”.

That was in 2012. But the CAG’s words ring true even in 2016. Ten years after that curious stampede to sign MoUs in the state, work has started on very few projects.

Multiple factors are to blame for this. A bunch of companies signed MoUs, not to build dams, but to make money by selling the MoUs. In an especially inspired con, a multi-level marketing company collected crores from unwitting investors by claiming it had signed an MoU with the Arunachal government for a “nanotechnology-based” hydel power plant of 100 MW which would be scaled up to 10,000 MW. The agreement was, in fact, for a small 14 MW plant.

Roadblocks in the path

More serious companies found themselves hamstrung by absence of roads and power lines. Not to mention local protests and extortion rackets, especially by local student unions. The state government too was a factor. While it wanted 26% equity in each project, it did not have the cash needed to pay for those shares.

At the same time, several of these companies now have very stressed balance sheets. There is lots of debt. There might even be shareholders asking why work on these hydel projects has not started. Selling less attractive assets, therefore, must be attractive for these companies.

The fallout of all this? They are making a beeline to NHPC, though the public sector company doesn’t seem to be too keen either. As the Business Standard report says, NHPC has declined to take over any project but “could contemplate taking over operations on chargeable basis, that too in some cases”.

The reason for its reluctance goes beyond understandable schadenfreude. Its solitary project in Arunachal – Lower Subansiri – is stuck in a quagmire as well. People in downriver Assam – worried about the dam’s impact on their livelihoods and fearful of catastrophic floods if the dam breaks during, say, an earthquake – are not letting work proceed.

Which leaves the companies contemplating the original question. How do they get rid of the white elephants they acquired with such gusto?