Our study shows that the construction of the Singoli Bhatwari project on the Mandakini River by Larsen and Toubro (L&T) does not make sense for the country as well as for the LNT shareholders.
LNT has established a subsidiary by the name L&T Uttaranchal (LTU) which is making this project. According to the data filed by LTU with the Government of India, the project cost was Rs. 566 crores in 2010 when L&T had planned to sell the electricity at Rs. 2.66 per unit.
Cost Comparision
| Sl. No. | Year | Project Cost | Electricity Cost | E-Flows |
| 1. | 2010 | 566 Crores | Rs. 2.66 per unit | No E-Flows |
In 2018, the Government has ordered that all hydropower projects in the country will release 25% water without generation of electricity to maintain the ecology of the river. This means that the project will generate 25% less electricity.
As said above, originally the capital of Rs. 566 crores were to be serviced at price of Rs. 2.66 per unit when no environmental flows were to be released. 25% less electricity will be generated if 25% water will be released without generation of electricity. Accordingly 25% less capital will be serviced by the project at a specified cost. Therefore, only Rs. 424 crores of capital investment in the project can be serviced at the price of Rs. 2.66 per unit.
We have come to know that LTU has offered to Government of Uttarakhand that it is willing to supply electricity at Rs. 4.25 per unit. At this rate Rs. 677 crores capital can be serviced because if at you can serve Rs. 424 crores at a price of Rs. 2.66 per unit, then on pro-rata basis you can service a capital cost of Rs. 677 crores at an electricity price of Rs. 4.25 per unit.
Cost Comparision
| Sl. No. | Year | Project Cost | Electricity Cost | E-flows |
| 1. | 2010 | 566 Crores | Rs. 2.66 per unit | No E-flows |
| 2. | 2018 | 424 Crores | Rs. 2.66 per unit | 25% E-flows |
| 3. | 2019 | 677 Crores | Rs. 4.25 per unit | 25% E-flows |
The project cost today is Rs. 2000 crores according to the information given to us by Ministry of Power in Delhi and Government of Uttarakhand in Dehradun. It means that LTU can service only Rs. 677 crores of capital cost out of its investment of Rs. 2000 crores. It is going to bear a loss of Rs. 1323 crores from this project. But LTU is continuing to make this project despite this loss and not disclosing to its shareholders and making a fool of them.
Our assessment is that LTU may be able to retrieve about Rs. 400 crores from the sale of turbines and other material if it scraps the project. Thus the loss borne by LTU will be nearly the same whether the project is made or scrapped.
Cost Comparision
| S.No. | Year | Project Cost | Electricity Cost | E-flows |
| 1. | 2010 | 566 Crores | Rs. 2.66 per unit | No. E-flows |
| 2. | 2018 | 424 Crores | Rs. 2.66 per unit | 25% E-flows |
| 3. | 2019 | 677 Crores | Rs. 4.25 per unit | 25% E-flows |
| 4. | 2019 | 2000 Crores | Rs. 4.25 per unit | 25% E-flows |
| 5. | 2020 | Loss to L&T = 2000 Crores – 677 Crores = Rs. 1323 Crores | ||
This was the story of LTU. LNT is equally involved in this game. L&T is buying the shares of L&T Uttaranchal. The project is being funded entirely by LNT through the purchase of shares. Now the question is: “What is the value of assets of L&T Uttaranchal against which L&T is buying its shares?” As we have said above, a capital cost of Rs. 566 crores were the original cost of this project. We have to reduce this by about 23% according to international standards for administrative and other expenditure which do not create tangible assets. So, the value of assets is of only Rs. 412 crores.
| Sl. No. | Item | Amount |
| 1. | Project Cost | 566 Crores |
| 2. | Interest and Other Expances | 154 Crores (90+64 Crores) |
| 3. | Total Assets Cost | 412 Crores |
As on 31.3.2019, L&T had purchased shares of Rs. 1141 crores in this company. L&T has paid an amount of Rs. 1141 crores against then assets of only Rs. 412 crores of L&T Uttaranchal.
In other words, for every rupee invested by L&T in L&T Uttaranchal, the value of the asset is only Rs. 0.36 paisa and L&T has not disclosed this fact to its shareholders.
| Sl. No. | Item | Amount |
| 1. | Project Cost | 566 Crores |
| 2. | Interest and other expances | 154 Crores (90+64 Crores) |
| 3. | Total Assets Cost | 412 Crores |
| 4. | Cost of Shares brought by L&T | 1141 Crores |
| 5. | Acutal Assets behind one rupee share | 0.36 paise |
There is need for the Government to step in. It is mandatory for L&T to disclose the true position of its subsidiary to its shareholders which it has not done.
Our submission to L&T is that if you have to bear so much cost by running this project, why don’t you scrap it, recover what money you can, and let the Mandakini free so that the river can dance, flow freely and the biodiversity can be conserved and this country is made a better place to live.
This free-flowing Mandakini River will be killed by the Singoli-Bhatwari Hydro Power Project being made by Larsen & Toubro Limited. LNT will incur the same amount of loss whether it completes and runs the project; or it scraps the project.
