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When J&K rejected loan offer for biggest power project.

One of the reasons given by state authorities for contemplating to rope in yet another central PSUs for developing the 1856-MW Sawlakote hydropower project has been the “lack of substantial resources” with the government. The issue was discussed last October by top officials from Union water resource ministry with a five-member Group of Ministers (GoM) led by then power minister Nirmal Singh.

But what the meeting didn’t discuss and what the government sat over for years has been an offer of around Rs 30,000 crore loan the state Power Development Corporation (PDC) from two central financial institutions—Power Finance Corporation (PFC) and Rural Electrification Corporation Limited (REC)— to develop Sawlakote and three other projects in the state sector, conceived decades ago.

Official documents accessed   revealed  that more than two years before central power ministry actually cleared Sawlakote, the largest ever hydropower project to be executed in J&K, the REC had on 20 January 2016 offered to fund 70 percent of total cost of the project in the form of loan.

Apart from Sawlakote, a senior official said, the REC had offered financial assistance for executing three more projects: 93-MW Ganderbal, 390-MW Kirthai-I and 930-MW Kirthai-II.

While construction cost of these four projects would require an investment of around Rs 33,000 crore, the debt component will be around Rs 22,000 crore on 70:30 debt-equity ratio.

Sadly, the government hasn’t taken any decision on the offer despite reminders from the company,” said a senior official.

He quoted a senior official from REC apprising the PDC “recently” that the Corporation can still avail the offer.

“The PDC has proven its credibility by establishing 900-MW Baglihar projects. It gets offers from different financial institutions which are ready to fund hydropower projects in the state, but the final call has to be taken by the government which has always shown cold shoulder,” said the official.

After sitting on the offer, the state government is now mulling to clear entry of central hydropower company, SatlujJalVidyut Nigam Ltd (SJVNL), for setting up of Sawlakote in joint venture with the PDC.

The government of India’s National Hydroelectric Power Corporation (NHPC), another central public service undertaking (CPSU), is already operating eight projects in J&K. In a joint venture with PDC, the NHPC is setting up three more power projects with capacity of Rs 2100-MW on Chenab basin.

On the other hand, there is no progress on construction of the three other projects for which government has already received all clarifications from power ministry.The PDC officials have raised apprehensions that these projects might too fall in the kitty of the SJVNL and hence it would walk away with share of generation from the projects.

The RECs offer wasn’t the only one the state didn’t take. Prior to it, the PFC had agreed in principle to provide loan assistance of Rs 12810 crore (70 percent cost of total project then) to the PDC for developing Sawlakote, which was originally conceived in 1964.

“This offer too didn’t materialise as the government didn’t respond to the communication,” said the PDC official.

“One fails to understand why state government preferred silence before union water resource and power ministries about standing offers from financial institutions for execution of Sawlakote and other projects,” said the official.

Apart from central financial institutions, in 2015, the Gulf-based lending institution ENAAR CAPITAL had also shown interests to fund the state power project. The investment banking firm which has a representative in Mumbai had written to then J&K Chief Minister on 26 October 2015, agreeing to provide loan assistance for the projects.

“It had however asked the government to arrange guarantee from premier financial institutions for securing the loan. The offer was given a silent burial,” the official said.

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