Sikkim Government’s Disinvestment in Teesta III to Greenko: Strategic Move or Missed Opportunity?
The Teesta River in Sikkim. Local people blame the Sikkim government for giving permission to build several megadams on the Teesta River basin.
| Photo Credit: RITU RAJ KONWAR
In a Cabinet meeting held on February 2, the Sikkim government decided to divest its entire 60.8 per cent stake in Sikkim Urja Ltd (SUL), the company that owns the Teesta III project, in favour of Greenko Energies Private Ltd, a private partner in the project.
Sikkim Chief Minister Prem Singh Tamang justified the decision on the grounds that it was done to avoid a debt trap. The previous Sikkim Democratic Front (SDF) government had taken around Rs.3,500 crore as loan from various sources in order to fund the Teesta III project. On February 5, Tamang announced in the Legislative Assembly that his government had decided to forego the stake in the company and that Sikkim had become completely debt-free with the sale of its stake in Teesta III.
On February 3, 2024, exactly four months after disaster struck the project on the night of October 3-4, 2023, Sikkim’s Power Department reportedly issued a notice announcing the Cabinet decision to disinvest its entire stake in SUL. According to this notice, Greenko would take over the Sikkim government’s loan—which stood at Rs.2,895.46 crore—from Power Finance Corporation. It would also take over the principal component of another loan taken from Sikkim Bank Ltd amounting to Rs.184.28 crore.
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However, the decision to divest the government’s stake was taken at a time when SUL had dues of roughly Rs.3,500 crore to be recovered from power distribution companies in Punjab and Haryana. The SUL was not a loss-making company–its annual reports indicate that it had been recording a healthy profit since 2021-22. Although it had lost a net amount of Rs.212.40 crore in financial year 2020-21, as per the audited financial statements, SUL made a net profit of Rs.230.41 crore in 2021-22. The net profit increased nearly sixfold to Rs.1,270.19 crore in financial year 2022-23.
The company’s annual financial statement for 2022-23 shows it had obtained a term loan at floating rates of interest from another source as well: the public sector power projects financing company REC Ltd, apart from Power Finance Corporation. The company had a total outstanding balance of Rs.7,897.73 crore to be paid to these two financial institutions at the end of financial year 2022-23: it had a balance outstanding of Rs.3,942.97 crore with REC Ltd while a balance of another Rs.3,954.76 crore was due to Power Finance Corporation as of March 31, 2023.
The annual report records: “During the FY 22-23, Company [SUL] has made prepayment of Rs 1,500 Crores to both the Lenders equally (i.e. Rs 750 Crore each) towards the outstanding Principal Term Loans over and above the due regular payments.” In a crucial meeting held on December 6, 2023, to deliberate on the prospects of reviving the hydroelectric project, the Union Ministry of Power recommended the fast-tracking of Rs.3,500 crore that the distribution companies of Punjab and Haryana owed the Sikkim government. This was later conveyed to the Sikkim government formally through a letter dated December 26, 2023.
Manner of disinvestment
It is not known whether the Sikkim government wrote to the distribution companies and whether their responses, if any, were discussed in the Cabinet meeting before the government finalised the sale of its stake in SUL. It is also not known whether the disinvestment decision was preceded by an independent assessment of the losses and damages caused to the project. According to sources close to the government, it was brought to the notice of the Cabinet, in a meeting held on December 22, 2023, that the State government had been unable to secure Rs.4,000 crore by way of loan waiver, subsidies, and support from the Central government and the two financial institutions in order to rebuild the project.
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Tamang has argued that the previous SDF government had entered into an agreement with Greenko in the past according to which the sale of government-owned stakes, if any, in future, would be in favour of the largest private partner in SUL. Reportedly, Greenko was trying to acquire Sikkim government’s stake in SUL even in 2020-21, a year in which the company had incurred significant financial losses. It had also been trying to acquire shares from other minority partners of SUL.
The disinvestment took place without competitive bidding or invitation of expressions of interest, which could have maximised profits for the government. It was also announced during the run-up to the 2024 Lok Sabha election, which has further raised eyebrows.
Ayaskant Das is an independent journalist and writer based in the National Capital Region.
