(Note: This is a composite post aggregating all the stories ET did over the past week on the hydel scam in Arunachal Pradesh, a state in North-Eastern India)

Between 2006 and 2009, the Congress government in Arunachal Pradesh signed 130 MoUs with companies allowing them to build hydelpower projects in the state. This development almost escaped all scrutiny. A handful of greens worried about the fallouts of building so many dams. The locals protested. But, in the rest of the country, the development did not cause many ripples.

Last November and December, however, a clutch of surprising news reports began doing the rounds — that the projects in Arunachal are facing large delays, that companies are looking to exit. To understand what was going on, ET went to Arunachal, and then to Andhra — most companies which signed MoUs hail from this state in south India. Here is what we found:

1. The companies are indeed struggling.

2. Listening to the companies, one could not help wondering if the state had signed more projects than it could support? It was also unclear why it had signed projects for more MW-age than what the centre had budgeted for in its 50,000 MW programme (this is explained in the stories that follow). Then, while the state government said this rush was born of no more than its urgent desire for development, many of the companies it had tied up with had questionable technical or financial ability to handle these projects. (Hint: Google “Nano Excel Power” and read a Times of India article that pops up on the first page of searches). There were other puzzles. For some reason, the state had turned its back on multi-purpose projects (which can also do flood control) and was only pushing hydel power projects.

And it looked like money had changed hands.

There are striking similarities between this and the ill-fated thermal power plant boom in Chhattisgarh. There too, companies had rushed in fecklessly, only to realise belatedly that their initial assumptions (about high power demand and abundant coal) were incorrect. For its part, signing MoUs with gusto, the state government had encouraged them.

3. There are two things to be said here. One, NHPC is not the only company whose projects were taken away and given to the private sector.

4. The consequences of Arunachal signing MoUs in return for cash is, yes, a scam. But it is a scam which cannot be measured only in Rupees. It has resulted in three unnerving developments. First, we have made a hash of the hydel potential in the state. As the first story shows, all manner of companies have walked away with MoUs. Second, this sudden influx of cash into the hitherto rudimentary economy of Arunachal Pradesh has resulted in some changes very similar to the “resource curse” starting to play out in Arunachal Pradesh.

5. An accompanying story, posted on the ET website, featuring interviews with three politicians in the state, the Congress’ Jarjum Ete, the BJP’s Tapir Gao, and Laeta Umbrey, MLA of a local party, explores these changes in the state in more detail.

6. The third big fallout is environmental in nature. Propelled by short term and personal interests, the state is making dramatic changes to the brahmaputra basin.

(If you want more information on any of this, google for Arunachal Pradesh State Pollution Control Board and read the EIAs uploaded on its website).

7. A trip to the first RoR (the sort of dam coming up across the state) project to come up in the state did nothing to assuage these concerns.

8. There were a couple of minor sidelights in all this. One, companies are today looking to exit the hydel space. But there are few buyers. Except a new breed of energy companies like Greenko.

9. While on Greenko, also see this: the transcript of our interview with Greenko’s head, Anil Chalamalasetty. It goes into a lot of detail on hydel — more detail than what we could have accommodated into these stories. And so, it was uploaded.

10. Now for the second minor sidelight.

This, as the story outlines, is an utterly bizarre transaction. No one I know, including friends and contacts with far more experience in corporate structuring, etc, than neophyte rajshekhar, have ever heard of something like this!

11. Put it all together and, as the opening essay argued, what Arunachal Pradesh has seen indeed is very similar to Coalgate.

All that plus the accompanying environmental and social damage!

On the whole, the package of stories leaves me feeling a bit dissatisfied. We could not study a couple of important dimensions of the hydel scam in Arunachal. Prime among them is the fact that a lot of politicians are putting their money into hydel projects in this state. For more on that, read Soumik Dutta’s articles on the hydel projects coming up in Sikkim. he has done a better job at uncovering those processes. Google him. “Soumik Dutta +Sikkim”.

ps – Last year, I had spent a lot of time on Coalgate. I see strong overlaps between what happened there and here. Maybe it is the brain force-fitting old frameworks onto new data. Or maybe the political economy of natural resources in India is not all that different between coal and hydel. Anyway, click here if you want more information on coalgate — a composite link aggregating the work by my colleagues and me on coalgate.