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Corruption Stultifies Mini-Hydros

Mar 5, 2011 2:20:08 PM - thesundayleader.lk
  • Politico Demands 10% Revenue Share

Reservoir of mini hydro power station at Malalpola, Yatiyantota. (traveljournals.net)

Corruption in the US$ 300 million mini hydro sector which had hitherto been “localized and containable,” has, however, within the past 1½ years, gone out of proportion with one provincial politico now even allegedly asking for a 10% cut in revenue, thereby stultifying such development work, an investor told The Sunday Leader.
Projects with the capacity to generate 175 mega Watts (mW) of power are those which are raring to go, but which are haunted by the spectre of corruption, with most of such projects concentrated in the Central, Sabaragamuwa and Southern provinces and such alleged malpractices being “rubbed on” to those areas coming under the Mahaweli Ministry as well, where such water resources found within that ambit could also be exploited for mini-hydro development.
Annual revenue made by the industry approximates to 20% of its current US$ 300 million investments which works out to US$ 60 million. However the source said that the full effects of corruption are not on existing mini-hydro projects, but on those which are on the pipeline.
Since the concept of private mini-hydro projects was rejuvenated in the minds of policymakers and planners some 18 years ago in 1993, the number of mini-hydro projects that are on stream to date, also has the capacity to generate 175 mW of power, equivalent to those which are yet to get off the ground.
The sole purchaser of such power is the national grid, namely the state owned Ceylon Electricity Board (CEB). During the colonial era when private enterprise was encouraged, a number of plantations had their own private power generated from mini-hydro reservoirs flowing through or near their estates, similar to that which is being exploited now, probably in a more sophisticated and on a much larger canvas than then.
Big money in mini hydro projects first came out into the open when a US investor started buying up such projects already on stream at premium prices from about 1½ years ago, the source said.
The Americans could afford to do that because money there was cheap, at some 2% interest, but here, then, money was at some 20% interest, though since then the cost of local borrowing has come down to 12%, he said.

Seeing ongoing projects sold at a premium and those in turn snapped up at premiums by investors, have whetted the appetites of local politicos to exert pressure on developers for speed money, the source said.
The worse thing is that their pressure for bribes comes after all approvals have been obtained, which in itself is a tedious process, running into some two years, he said.
And in the interim the developer has dumped in several millions of rupees on the project, mainly from money borrowed from banks, making it difficult for him to withdraw when the speed money order is received.
Such projects, though small in size, yet cost a few hundred million rupees each, he said.
The “spoke in the wheel” generally comes in the form of environmental concerns (even after Central Environmental Authority (CEA) approvals have been obtained) which such corrupt local politicos raise, and which the CEA is allegedly too timid to desist, though they themselves have had already given the greenlight for such projects to go ahead, the source alleged.
“The top has been informed about this state of corruption and has promised to take action, but nothing has happened,” he said. Probably because a few votes from people such as us are discountable, whereas those allegedly corrupt provincial politicos command several votes more and are therefore more useful from an electoral perspective, and as such the matter is not being pursued,” the source said.
And affairs are being made worse with local government elections round the corner, he said.
“We are prepared to build local roads, which we are now doing, we are also prepared to pay for such local councillors electioneering work which we are doing and even paying nominal amounts as graft money, but not on a 10% revenue sharing operation,” the source said.
He further said that under the present tariff regime the CEB is prepared to pay them Rs. 13 for one Kilowatthour  (kWh) of energy generated for a period of eight years, after which the rate comes down to Rs. 7 and with a lapse of 15 years, the price comes further down to Rs. 4 a unit.