Funds Sought for River Project by S. Dinaker The Narmada river project has become vital for the existence of Gujarat, and the state government would do its best to complete it said Gujarat's former Finance Minister, Sanat Mehta, who is also chairman of the government owned SSNNL . . . Mehta, 70, who was here to market the NRI component of the company's Rs 5 billion ($159m) non-convertible bond issue which is scheduled to hit the market in October, said: 'We have reached a stage when the survival of Gujarat depends on the completion of the dam and we will succeed even without the World Bank's support.' Mehta, who was addressing a group of Gujarati NRIs here on July 22, appealed to them to make the issue a success. 'We have to show the (World) Bank that the project can't be completed without their help,' he said . . . . He cited the success of SSNNL's previous bond issue, the first public offering after the World Bank's withdrawal which raised Rs. 5.75 billion, at 17.5%, as against an expected Rs. 3 billion . . . . Recently approved by the government, the 20-year bonds carry an interest rate of 16% according to him, and 40% of the issue has been earmarked for NRIs. 'This is the first time we are going to the NRIs,' said Mehta. 'The NRI component may also be made semi-convertible.' The project, which will be completed by the year 2000, has an annual budget of Rs 8 to 10 billion, according to him. 'This year (1993-94) we spent Rs 7.49 bn on the project, the highest ever since the project started in 1988,' beamed Mehta . . . . As against an expected crowd of 50-100, about 20 people turned up for the meeting. But the handful raised quite a din toward the end of the meeting when Mehta was hit by questions regarding the project;s viability. 'We are in the final stages of producing water and power. We will release water in June 1995 and generate 250 megawatts of power,' said Mehta. The dam, which will reach a height of 110 metres next year, will generate a revenue of Rs 2.25 billion. [???] 1995 from supply of water (20%) set apart from industrial use according to him. 'Indirectly we are saving thousands of crores. We produce [???] megawatt of power at Rs 20m compared to 30-45m for other power projects. . . . . Chatting with newsmen before the public meeting . . . Mehta reeled a slew of figures, supporting the rehabilitation efforts. 'We are spending Rs 145,000 per family. We have rehabilitated 4,276 families in Gujarat of a total 4,500,' he said. 'We have purchased and [???] 14,726 hectares of land.' In Maharashtra, he said Sharad Pawar government has assured cooperation and is releasing land in 1994-95 to rehabilitate the remaining 650 families. In Madhya Pradesh, where a majority has been affected, Mehta claimed that of the 193 villages only 25 were such where any private property was affected while 114 villages were affected negligibly. But a report, issued in June by the International Rivers Network, says that resettlement measures have been inadequate and many families have been forcibly evicted. Quoting World Bank estimates, he said that the cost of the project is Rs 130 bn, while the overall economic benefits come to Rs 276.29bn and the internal rate of return for the project [???] between 16.75 and 20%. ------------------------------------------------------------ - SOME COMMENTS 'the first public offering after the World Bank's withdrawal which raised Rs. 5.75 billion, at 17.5%, as against an expected Rs. 3 billion' According to Bombay management consultant Pradyumna Kaul 'SSNNL is already bankrupt and has over the last 3/4 years been in the red. Last financial year (1992-93) it had a negative balance of approx 50 cr. (Rs. 0.5 billion) even after collection of Rs 375 crore (3.75 billion) by domestic bonds in December 1993 [although the bond issue raised Rs 5.26 billion, by law the SSNNL is only allowed to use 3.75 billion as they can only use 125% of the amount they received Finance Ministry permission to ask for which was Rs. 3 billion]. Again and again cheques issued by SSNNL to contractors, suppliers and such creditors have bounced or cancelled (after issuance) due to lack of funds.' In the past SSNNL has claimed that it will raise Rs. 10 billion from NRIs (see Thakker, H. 'Can SSP Ever Be Financed?, Economic and Political Weekly, October 16, 1993). This issue has a Rs. 2 billion NRI component. 'The project, which will be completed by the year 2000, has an annual budget of Rs 8 to 10 billion, according to him. 'This year (1993-94) we spent Rs 7.49 bn on the project,' According to the World Bank, SSP's huge canal network will not be completed until 2025. Such a delay in the project will have huge financial consequences. According to Kaul the whole of the Gujarat annual budget is only around Rs. 21 billion and its annual irrigation spending 6.5-8.5 billion. This gives an idea of the amount of state resources being sucked up by SSP -- almost the entire irrigation budget being spent on a project which can at most irrigate 14% of Gujarat's land area. By the end of 1993, according to Gujarat government figures, a total of Rs. 26.85 billion had been spent on SSP (see Thakker (1993)). If the Gujarat government kept up an expenditure of 7.5 billion a year between 1993 and 2000 it would have spent 79.35 billion (26.85 + (7.5 x 7)) on the project -- only 60 per cent of the (extremely optimistic) project cost quoted by Mehta of 130 billion!! (While inflation would allow for the state to increase its expenditure it will also raise the cost of the project). Quoting World Bank estimates, he said that the cost of the project is Rs 130 bn It is very interesting that Mehta quotes a World Bank estimate for the project cost of Rs. 130 billion. In last year's bond issue prospectus the cost was put at only 90 billion (plus interest estimated at 17 billion). In the World Bank's 1985 Staff Appraisal Report the cost was in fact put at 136.4 billion -- and the most recent cost estimate to have appeared in a World Bank document (May 1994) put the cost at $11.4 billion (Rs. 342 billion). The NBA said in 1993 that 'by any conservative estimate the cost will exceed Rs. 250 billion' (Thakker (1993)). The NBA's figures, unlike those of the SSNNL include the cost of drinking water supply, estimated by the Narmada Control Authority in 1992 as Rs. 30 billion. 'We are spending Rs 145,000 per family. We have rehabilitated 4,276 families in Gujarat of a total 4,500,' he said. 'We have purchased and [???] 14,726 hectares of land.' Recent official figures for families eligible for resettlement in the three states add up to 41,500. If it costs 145,000 rupees for each family, the Nigam will have to find Rs. 60.17 billion just for resettlement!! The families who have been resettled are faced with terrible problems including a lack of clean drinking water, land of inadequate quality and quantity, disputes with host communities, and a lack of grazing lands, firewood, medical and cremation facilities. Death rates, especially among children and the old, have increased markedly. Many people who have been 'resettled' have in fact gone back to their original villages. The land so far acquired is spread among around 400 different resettlement sites, splitting up villages and families among many different sites. The quality of the sites acquired for resettlement has got steadily worse over time and no plans are available for where land will be found for the 13,000 families who are still expected to move to Gujarat (oustees from Maharashtra and MP can choose to go to Gujarat -- MP has not yet acquired any resettlement land so its oustees have little choice). The figures quoted my Mehta give an average of 3.4 ha per family so another 44,200 ha would have to be acquired for 13,000 families. In Maharashtra, he said Sharad Pawar government has assured cooperation and is releasing land in 1994-95 to rehabilitate the remaining 650 families. The Maharashtra government has had great difficulty in persuading the central environment ministry to release a total 4,300 ha of forest land in Maharashtra for resettlement (the Maharashtra government itself does not have the legal right to release any land). This is just over half the land needed for resettlement in the state and no- one knows where the rest of the land will come from. The environment ministry recognizes that 10-15,000 tribals already depend for their livelihood on the 1500 ha of forest land released in February 1994. In Madhya Pradesh, where a majority has been affected, Mehta claimed that of the 193 villages only 25 were such where any private property was affected while 114 villages were affected negligibly. This is blatant nonsense. Over 33,000 families will be displaced from the 193 villages in MP. The MP government admits that it cannot resettle them and wants the dam height reduced to bring down the numbers of oustees in the state. For more information contact: Patrick McCully, Campaigns Director, IRN. Tel 510 848 1155. Fax 510 848 1008. -- Ontario Public Interest Research Group - Carleton, 326 Unicentre, Carleton University, 1125 Colonel by Drive, Ottawa, Ontario, Canada, K1S 5B6, (613) 788-2757. "The more I learn, the less I believe."