Sikkim power project dilemma: Should government pay Rs. 1000 crore compensation for nothing?

Soumik Dutta

After not stirring for years, the Sikkim vigilance police woke up to a case that has been a blot on the State for more than a decade. Recently it conducted raids at the houses of several retired officials of the Sikkim Power Development Corporation Limited (SPDC) , and the  Energy & Power department government of Sikkim in connection with alleged irregularities in the allotment of several hydro power projects, abuse of official position, tender fraud and huge losses to the state exchequer.

This case refers to the grant of a contract to build 3 power houses to a Delhi based hydro power company, ATPIL, in 1998. The company failed to build them even when the state government served as a guaranttor for a hefty loan. Finally the contract was annuled by the state government in 2008 prompting ATPIL, to seek arbitration. The judgement was in favor of ATPIL that could have benefited them  through a financial decree of the security deposited in a government treasury. Visibly, the defaulting company was on the threshold of  Rs. 1000 crores as compensation without building anything, before an embarassed governemnt stepped in through raids. The big question remains- how do you percieve the judgement on the award of financial decree to a contracting company when it falled to execute the project?

This ambivalence was settled by the government when it acted on a written complaint of the Sikkim Bhutia Lepcha Apex Committee(SIBLAC), an apolitical organisation that alleged massive corruption and abuse of official position by the government officials in connivance allegedly with New Delhi based hydro power developer, Amalgamated Transpower India Limited (ATPIL). The viiglance police filed multiple cases against a litany of individuals and entities.

“We urge the government to find a quick legal remedy to the complex problem and prevent further loss to the exchequer and loss of public money. It should not pay any compensation to fraudulent companies like the ATPIL”, said SIBLAC Convenor Tseten Tashi Bhutia.

Revisiting the circumstances of the case, this reporter sought out D. D. Pradhan, the then Managing Director of the Sikkim Power Development Corporation Limited (SPDCL), who was instrumental in signing the MOU with ATPIL.  Pradhan refused to comment and has since become incommunicado.

Others in the government who were associated with the deal refused to comment.

Mr. P. K. Das, Managing Director of ATPIL was of the view that the government decided to take action against his company only after the court awarded them the financial decree. Das told this reporter: “I totally refute all allegations of bribery and corruption charges levelled against me or my company. I have abided by the clauses of the arbitration and received a fair order and now we are optimistic of execution of the money decree awaiting pendency at the Sikkim high court”, Das said.

Commenting on the vigilance raid and the FIR, Das said, “ What was the government doing for over a decade, if it thinks the MOU and the entire deal was corrupt?, just when it realised that we are going to win the money decree, they are using intimidating and delaying tactics”

Sikkim tranquil exterior hides a dark underbelly.

Here the unemployment is soaring and understandably corruption which is practised with impunity. Despite its high suicide rate and rapacious venality, Sikkim is listed very high in the country when it comes to maintaining  law and order.

After its merger in 1975, national parties never struck a chord with the local populace. Expectedly, the state remained under the control of the local political parties that have been forming governments in Gangtok.

The centre is using the tactic to buy peace in the restive north eastern states by giving high grants, expansive schemes and by not interfering in local governance or on bothering on how the schemes are implemented and funds utilised. Sikkim was no exception.

With no oversight from Delhi, corruption reached its peak during 24 year continuous tenure of the Sikkim Democratic Front Party (SDF), under Chief Minister Pawan Kumar Chamling, the longest serving Chief Minister in India, and also president of the party.

Till 2014 elections, Sikkim did not have a single member of any opposition party in the 32 member Sikkim Assembly. That allowed the ruling coterie to grow their wealth exponentially.

The centre on its part has sought to buy peace and support to the restive north eastern states by giving high grants, expansive schemes and not interfering in local governance or on how the schemes are implemented and funds utilised. Sikkim was no exception.

CBI enters

CBI in a letter (12-10-.2010) to the Chief Secretary of the State alleged that ATPIL did not have the capacity to produce the 110 MW in the three projects.  

To prevent CBI from digging deeper,  the Chamling government  invoked section 6 of the DSPE Act 1946 ,thereby  not allowing it to  enter Sikkim  for formal case filing against alleged favouritism and losses  of public money,  corruption  etc charges. This was in 2010 two years after MOU was terminated. 

Instead, the then Chamling government appointed Justice R. K.  Patra as one man enquiry committee against the corruption charges to investigate its own corruption!

The problem for Sikkim government is that they have to deposit Rs. 350-400 crores to the  Sikkim high court  as guarantee,  to challenge the  arbitration order  favouring ATPIL which is now in the  form of  a money decree worth Rs. 1000 crores!.

The recent July 28^Th order of the High Court states it, and a Supreme Court order of 14^Th October 2022, has asked the High Court to ensure that the said amout is deposited within a time frame, as well as to dispose of the matter within six months latest, while condoning the delay in execution of the money decree in favour of ATPIL.

The government’s quick intervention was meant seemingly to undo the past mistakes. Will they work?

How did all happen-a flash back

Sikkim government signed a MOU signed on April 18th, 1999 with Delhi based private hydropower developer Amalgamated Transpower India Limited (ATPIL), an unlisted company, for development of Rolep, Ralang and Chakung Chu hydropower projects to be implemented on debt financing and implementation mode. Subsequently, the MOU was revised on 21^st December 2002 with ATPIL and Sikkim Power Development Corporation (SPDC).

 The new MOU vested project land with ATPIL for 35 years, extendable by another 35 years on BOOT basis. The project capacities were increased too, from 24, 19, 12 &16 MWs (four small projects, later clubbed into three), to Rolep 36MW, Ralong 40 MW &Chakung Chu60 MW.

SPDC as per the new MOU was to develop all infrastructure, approach roads, sub-station and all power evacuation and transmission lines etc and hand over to ATPIL. Interestingly, the initial MOU vested loan and interest repayment with SPDC NOT ATPIL.

Tender floated. Was it influenced? :

On 23 December 1998, a Notice Inviting Tender (NIT) was published by the Sikkim Power Development Corporation(SPDC), in The Economic Times, inviting offers from parties who could arrange 100 per cent debt for development of the Rolep-I, Rolep-II, Ralong and Chakungchu projects with a combined capacity of 61 MW .

Eight developers sent their offers along with the New Delhi-based Amalgamated Transpower India Limited (ATPIL). Sikkim government decided to commission RolepI, Rolep II, Ralong and Chakung Chu through market borrowing of Rs.300 crores and a completion date of four years.

Offers were opened on 5 February 1999 in the presence of six persons, among whom P K Das, the owner of ATPIL, was then consultant to the government of Sikkim.

 On 18 April 1999, the work was formally awarded to ATPIL, headed by the same P K Das.

While  ATPIL was not progressing with the three projects,  they were allowed to bid for two more projects of capacity 500mw  and 520 mw through a JV ATPIL  formed  with Karnataka  power corporation limited(KPCL),  a government  of Karnataka  PSU. 

This correspondence and blame game continued unabated, until May 2^nd 2008, when the MOU with ATPIL was terminated by the SPDC. Assuming that ATPIL was removed from the equation after the MOU was terminated, the SPDC allotted the same projects to several other private developers giving them letters of Intent(LOI), and this in turn turned into a legal battle.

ATPIL moved arbitration proceedings at the Supreme Court after the process reached an impasse in Sikkim.

— author, Soumik Dutta, is an investigative journalist. He can be contacted at investigativejournalistindia@gmail.com