Gangtok: The 1,200 MW Teesta Stage-III Hydro Power Project in Sikkim, built at a cost of Rs 13,965 crore, has stopped generating electricity and for all practical purposes become defunct following the glacial lake outburst flood (GLOF). The project, however, is fully insured and Sikkim Urja, the state enterprise that runs the project, has already filed for insurance claim, ThePrint has learnt.
The flood that originated in the South Lhonak Lake in North Sikkim on the night of 3 October, submerged the hydropower project and washed away the 60-metre high Chungthang dam.
A senior official of Sikkim Urja (formerly Teesta Urja), told ThePrint that the 1,200 MW project is fully insured by a consortium of insurers led by IFFCO-Tokio General Insurance.
The total sum assured in the policy is to the tune of Rs 11,400 crore, the official, who wished to not be named, told ThePrint.
“We filed our claims for total damages caused by the flood the very next day. The process has been initiated,” the official said.
However, settling a big insurance claim as this will not be as easy as settling a claim for home burglary or a motorcycle theft and could be a complex, long-winding process.
For instance, under the policy, while there is a 100 percent coverage of the sum assured for losses resulting from flash floods or cloudburst induced floods, coverage for damages by GLOF is capped at Rs 500 crore, the official added.
“We don’t know how it’s going to play out, it’s too early in the day to tell,” a second Sikkim Urja official said.
While the process of claiming damages has started, Sikkim Urja and the state government will also get an immediate breather from repaying the massive dues of over Rs 10,000 crore that they owe the lenders for the loan taken to develop the project.
The Reserve Bank of India’s (RBI) 2018 master direction on Relief Measures by Banks in Areas affected by Natural Calamities, while not using the word ‘moratorium’ for non-agricultural loans — as this one is — does say that the State Level Bankers Committee or the District Consultative Committee can “take a view” on whether loans need to be rescheduled, which could include postponing them by a specified period.
“However, while the affected company will get a relief from repaying, the interest on loan will continue to accumulate. There is no relief on interest,” the second official quoted earlier said.
Officials said that in such a scenario, it is imperative that claim is settled at the earliest and interest does not accumulate.
According to a December 2021 annual report of the Insurance Regulatory and Development Authority of India, as many as 3,428 claims for Rs 1,705 crore for natural calamities such as cyclones and floods were still pending before insurers in 2020-21. During this period, while insurers got a total of 34,304 claims for Rs 2,559 crore, only 29.72 percent claims worth Rs 760.68 crore were settled.
Also read: How an alert ITBP jawan on duty 8 km away from South Lhonak lake raised 1st flood alarm in Sikkim
Repayment of loan a ‘grave concern’
Sikkim government officials told ThePrint that repayment of dues of over Rs 10,000 crore that Sikkim Urja and the state government still owe lenders has become a matter of “grave concern” for them.
The state government has a 60.08 percent stake in Sikkim Urja through its investment company, Sikkim Power Investment Corporation Limited (SPICL).
Speaking to ThePrint, S. Sunil Saraogi, chairman of Sikkim Urja, said: “I am spending sleepless nights thinking about the suffering of the people because of this natural calamity and how the Sikkim government will take care of the huge liability of over Rs 10,000 crore. It’s a matter of grave concern.”
Talking to reporters last week, Sikkim Chief Minister Prem Singh Tamang had called the project a “white elephant”. “We will not get any power from it now but will continue to repay the loans,” he said.
The SPICL holds a 60.08 percent stake in Sikkim Urja (earlier known as Teesta Urja), and of the remaining 40 percent, 35 percent is owned by Greenko Mauritius, a wholly-owned subsidiary of Mauritius-based Greenko Energy Holdings and 5 percent by PTC India Limited, a leading power trader, said a state government official who wished to not be named.
In 2005, the then state government had chosen Teesta Urja Limited, a private consortium led by Hyderabad-based Athena Group, to develop one of the largest hydropower projects on the Teesta River. Teesta Urja’s shareholding structure has changed several times since then. For instance, in 2019, Athena’s share was acquired by Greenko Mauritius.
The project cost back then was Rs 5,705 crore and its completion deadline was 2012. Back then, the state government was a minority shareholder in Teesta Urja, with a 26 percent stake.
In 2015, the state government increased its stake to 60.08 percent and became a majority shareholder.
Teesta-III was finally commissioned in February 2017.
Sikkim govt & Sikkim Urja’s pending dues
Of the over Rs 10,000 crore dues, the state government through its investment arm SPICL has to repay approximately Rs 3,000 crore to Power Finance Corporation (PFC), a PSU, and another Rs 300 crore to State Bank of India.
Sikkim Urja, meanwhile, has to repay its lenders approximately Rs 7,000 crore — 50 percent to Rural Electrification Corporation and another 50 percent to PFC.
Explaining the total dues that the government has to repay, a second government official said, “In 2015, the state government had taken a loan of approximately Rs 1,800 crore from PFC, when the former increased its stake in Teesta Urja. With time, the amount has ballooned to Rs 3,000 crore.”
The official added that as part of the implementation agreement that the state government signed with Teesta Urja in 2005 for developing the project, of the total power that was to be generated from Teesta-III, the state was entitled to 12 percent of the power generated that would be free of cost for the initial period of 15 years starting from the date of commercial operations of the project, and then 15 percent for 20 years.
The right of the remaining 88 percent remained with Teesta Urja.
“The Sikkim government pledged the royalty from its 12 percent share to PFC to repay its loan and interest in lieu of the Rs 1,800 crore it had taken. Besides, it also pledged its share of 60 percent in Sikkim Urja as additional security,” the official added.
As part of the agreement, Teesta Urja had to develop the project on a ‘build, own, operate and transfer’ basis in joint venture with the state government and run the project for 35 years. After which, the project was to be handed over to the state government.
(Edited by Zinnia Ray Chaudhuri)
Also read: What’s a ‘moraine’, how its fall caused Sikkim’s South Lhonak Lake flood and why threat remains