Damodar Valley Corporation (DVC) was one of Jawaharlal Nehru's 'temples of modern India'. But decades of conflict with beneficiary state governments and mismanagement have turned the eastern powerhouse into a 'temple of doom', presiding over a financial dead end.
In a confidential report to the power ministry, Arup Roy Choudhury, chairman of India's biggest generation company NTPC, said the government should either give the company a complete makeover or consider pulling the plug. Roy Choudhury was last month given additional charge of DVC.
"A total paradigm shift is required if DVC has to survive," Roy Choudhury said, putting four posers: Does the original philosophy behind forming DVC still hold good? Should DVC give up the activities that are in conflict with state government's role? Should DVC become just a generator and distributor only for bulk power? Is it a good time to reverse the 1943 initiative and wind up DVC?
DVC was set up under a special Act with the aim of controlling the wild and erratic Damodar flowing through West Bengal and Jharkhand. The two states are stakeholders along with the central government.
"When DVC was formed, probably the Centre-state and state-to-state dynamics were totally different. Today, the main stakeholders for whose benefit it was created do not feel that DVC is working for their benefit... Somehow, today it (DVC) is stepping on each others' toes and not synergizing with any beneficiary," Roy Choudhury said in a telling commentary on the company.
No wonder, the states have stopped acting as stakeholders. But Roy Choudhury also blamed the management, which went for expansion without observing the golden rule of first securing land, water, environmental clearance, coal linkage and power purchase arrangements. As a result, most of the projects are stuck.
Such carelessly planned expansion and lack of corporate vision have put DVC in dire straits: Arrears of Rs 6,880 crore, mostly from Jharkhand; negative cash flow of Rs 110 crore per month; IDC (interest during construction) liability rising to Rs 2,941 crore on account of delays and no recovery of even fixed costs of 1,100 mw in the absence of power purchase agreements.
The future too appears grim. New plants have an average tariff of Rs 4.5 per unit, which would make it tough for them to get merit order — a queue in which plants with lower marginal cost are called to switch on first for meeting demand.
Roy Choudhury also found fault with the mining foray, saying the coal tariff agreed with the mine operator had been vitiated in the absence of contractual safeguards due to changes in the coal pricing policy.
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