The Hindu Business Line : Bonding the Narmada dam

THE party has started for many in Gujarat as June will see the Narmada waters flowing through the main canal rather than through the bye-pass tunnels, as they do now, and bring an additional five lakh hecatres of arid land in the state under irrigation.

Even as the Election Commission is keeping a watchful eye on the State government, some of the leading corporate houses such the Reliance Group, Nirma, Essar and Gujarat Ambuja Cements have begun endorsing the virtues of the dam project through full-page advertisements in the print media.

The activity on the Narmada front was to be expected as the dam height of the Sardar Sarovar Project (SSP), is all set to breach the minimum draw level of 110.64 metre mark before the onset of monsoons this year. In other words, this is a big step towards its ultimate goal of irrigating 1.8 million hectares of agricultural land, a bulk of which now lies in the drought prone belt of Saurashtra and Kutch.

The other plus, of course, is that 450 MW hydro-electric power would commence generation during this time span, with five more turbines of 200 MW each getting commissioned every three months thereafter. At the headquarters of the nodal implementing agency, the Saradar Sarovar Narmada Nigam Ltd (SSNNL), a wholly owned subsidiary of the Gujarat government, the overriding sentiment is one akin to seeing the proverbial light at the end of the long dark tunnel. The decision of the Narmada Control Authority (NCA), coming a good year after the dam height touched 100 metres, has ushered in a sense of urgency at SSNNL. The SSP's market borrowings, which has identified the bond market as the single most important source of funds, has gone in for two-three bond issues every year over the past 11 years.

The latest Narmada bond issue from SSNNL — the fourth such issue during 2003-04 — saw Rs 500 crore being raised at coupons of 8.25 per cent and 8.6 per cent. Meanwhile, on March 20, the Nigam also redeemed bonds worth Rs 615 crore and this came close on heels of the retirement of Rs 332 crore with a coupon of 14 per cent.

Thus, the SSNNL outstanding on the bond front this year stood at Rs 6,069.34 crore, it having repaid around Rs 1,500 crore. This was on course. compared to 2002-03, when Narmada bonds worth Rs 1,342 crore were redeemed and the outstanding was at Rs 6,024 crore.

Underlining the stress on money matters that has come to the fore once again at SSNNL is the fact that it has leveraged two loans aggregating Rs 1,000 at the fag end of this fiscal. While Rs 500 crore came from the Nabard, a like amount was sourced from the Central government's Accelarated Irrigation Benefit Programme (AIBP).

That is not all, as there is some movement by way of fund flow from other States, Rajasthan having chipped in with Rs 307 crore this very month. It is another matter altogether that some of the overdues from States is disputed as Madhya Pradesh still owes SSNNL Rs 1,100 crore, Maharashtra Rs 500 crore and Rajasthan another Rs 200 crore.

The SSNNL brass seem far from worried about the other States fulfilling their financial commitments as the entity has till date declared a paid-up equity capital of Rs 9,825.49 crore, of which the allocated portion is Rs 8,193.40 crore and pending allocation is Rs 1,634.09 crore. This is against the authorised share capital of Rs 12,500 crore for SSNNL, perhaps one of the most ambitious projects that has ever been executed by any State government.

According Mr S. K. Mohapatra, Managing Director, SSNNL, the present goal is to complete the 1.6 lakh cu.m.of construction that needs to be completed in the next 100 days. "We are working against the onset of the monsoons and have to complete the dam work before the catchment overflows with the Narmada in spate. There is also the service gallery and the pier work for the dam gates that has to commence simultaneously. Clearly, it is much more complicated than merely dumping concrete," he said.

There are some 2,000 people working at the dam site, where there was no respite even when no work was permitted during the last year. As against the minimum level work that justifies the SSP fixed cost that is put at 3 lakh cu.m. per annum, the last couple of years have not witnessed work significantly above 1 lakh cu.m. And it has cost money to keep the five 50 MW generators installed at the canal head by BHEL in 1997 in working condition over the past seven years.

Meanwhile, the SSP would be left with only two landmarks to achieve, once the 110.64 metre level is reached. First on the horizon would be the 121-metre crest level where the cement structure ends and the project is allowed to both generate and irrigate substantially.

Thereafter, the SSP would be left with only the steel structure as the dam gates alone taking it to the ultimate height of 138 metres. That is not the end-word by any stretch of imagination as there still remains 100 km of main canal work to be completed.

Though the 104-km Saurashtra branch canal is nearing completion, the 307-km Kutch branch canal is yet to get started. Ironically, it is the shortage of water in the Saurashtra region that is hampering work on the canal which is currently used to ferry water to Rajkot — a situation that is unlikely to change till the monsoons set in.

Meanwhile, the SSP would be left with only two landmarks to achieve once the 110.64 metre level is reached. First on the horizon would be the 121-metre crest level where the cement structure ends and the project is allowed to both generate power and irrigate substantially.

Clearly, there have been huge cost over-runs for the project, originally estimated at Rs 6,406 crore in 1986-87, when it was envisaged to be completed over the next decade.

Thereafter, the 1995-00 stoppage of work by Supreme Court ruling and a series of delays saw the cost estimate spiralling out of control. The last official estimate by SSNNL as per 1991-92 price levels put the SSP cost at Rs 13,180.62 crore. Since then, there have been no official efforts at fixing the project cost, though SSNNL authorities say a revised estimate is under scrutiny.

However, there is there one financial detail that cannot be denied — the cost incurred by the SSP on January 31, 2004 stood at Rs 16,011.94 crore. The incremental take on this reality is that the interest accrued on account of borrowings has already climbed to Rs 3,900 crore.

It is another matter that all this does not faze either the political bosses or the mandarins at SSNNL since the unofficial word is that the eventual project cost has already been put at around Rs 27,000 crore. However, the figure can be disputed and some are willing to go as high as high as Rs 35,000 crore when the project gets completed, hopefully over the next couple of years.

With the SSNNL going in for three and even four bonds in the last couple of years, a trend that is likely to continue with the project reaching its last leg, the capital cost is likely to hit the upward curve in the days to come. On the other hand, there is also an attempt to retire old, costly debt by leveraging newer loans as SSNNL's bank exposure stands at around Rs 800 crore.

With the Nigam also accessing low-cost supplier's line, as in the case of Sumitomo Corporation Japan, which has extended it a 21 billion yen credit, the Narmada project does not seem averse to taking the narrow road of fiscal prudence either.

Ultimately, the SSNNL may be banking on the bullish sentiment of Gujarat's investing public to bail out the Narmada project. Having stayed put during the bumpy ride over the past decade, the SSNNL bosses and, in turn, Gujarat, may have reason to believe that pay-back time is close at hand.

Till then, it matters not a whit that it continues to tap the debt market with one bond issue after the other as there are already rumours doing the rounds about an impending Narmada IPO. Surely, if and when that comes about, it would be the mother of all public issues for the investing public of Gujarat.

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