|
In
1992, the Karnataka State Electricity Board (KSEB) signed a
Power Purchase Agreement for a 1000 MW coal-fired power plant at
Mangalore with an American company, Cogentrix Energy Inc. The
coal was to be imported. KSEB promised to purchase power from
Cogentrix for a period of 30 years. At the price agreed upon,
KSEB would pay Cogentrix about Rs. 2000 crore in the first year
that the plant was operational. The total contract was valued at
Rs. 75,000 crore. KSEB faced a worse situation than MSEB, as it
had to pay nearly 80% of its total revenue for a 25% increase in
capacity. The state cabinet issued an office order authorizing
the state government to enter into MoUs for 250 MW projects in
Mangalore and Bangalore. In July 1992, in violation of
Government of Karnataka's (GoK's) order, the MoUs were signed
with Cogentrix for two 500 MW projects. Also, in violation of
its own orders, the GoK, in the MoU with Cogentrix, allowed the
company to bring in any partners they wished.
In
1992, Cogentrix was a very small company. Its total paid up
equity was less than Rs. 45 lakhs. Again, at the time of coming
to India, its debt equity ratio was 19.2: 1. The company had no
international experience and had never undertaken any project of
more than 250 MW. Thus, it seemed that the company could not
under any circumstances be in a position to execute the project.
In February 1993, a committee of secretaries of the state
government recommended the approval of the project. In March
1993, a government order permitted Cogentrix to sell power
directly to Industrial Units at mutually negotiated rates.
Subsequently, this order was overturned and the government asked
KSEB to buy all power from Cogentrix. Thereafter, the
plant at Bangalore was cancelled and the plant at Mangalore was
allowed to double its capacity to 1000 MW. With the shift of
location, a new set of problems emerged. Since all the power
generated in Mangalore locally was not required, the power had
to be transmitted to Bangalore. This transmission of electricity
from Mangalore to Bangalore required new transmission lines,
which called for an additional investment of Rs. 750 crore. In
addition, the Electricity Board would incur transmission and
distribution loses to the extent of upto 20% for the
transmission of this power to Bangalore.
Despite the problems the project continued. The state government
was to sign a PPA with Cogentrix. In January 1994, the central
government made it a pre condition that the PPA be vetted by
independent experts if it has to issue a counter guarantee. A
team of experts from India (Tata Energy Research Institute
(TERI), together with American and German firms, issued a report
that was severely critical of the PPA. They commented that the
PPA was one sided, and that the capital cost of the plant was
too high. Cogentrix was either getting outdated equipment, or if
it were using state of the art equipment, it stood to gain about
Rs. 70 crore a year as hidden profits on this single count.
Again, the cushioning in the capital cost and other such factors
would add very substantially to the company's profits, at the
expense of the exchequer. In August 1994, a PPA was signed by
the KSEB with the Mangalore Power Corporation (MPC). Cogentrix
was the sole promoter of this company. In January 1995, the MPC
submitted a techno-economic feasibility report. In August 1995,
a company from Hong Kong, Chinalight and Power was brought in as
a "co-sponsor" in the project. The MoU entered between the two
parties was not disclosed. The balance sheet of the MPC for the
period 1995-96 did not show any expenses incurred in India or
abroad. However, between 1992-96, the balance sheet of Cogentrix
showed that approximately Rs. 175 crore had been incurred as
"developmental expenses" on the Indian Project. In 1998, a
public interest litigation was filed in the Karnataka High Court
alleging payment of kickbacks. In response to the petition, a
division bench of the High Court issued a directive for a CBI
enquiry into the matter. However, a Supreme Court Bench stayed
this order of the Karnataka High Court, without assigning any
reason. In December 1999, Cogentrix announced that it would
withdraw from the project. Among the reasons given by Cogentrix
for opting out of the project was the public interest litigation
which was pending in the Supreme Court. |
