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It is the largest private investment project in industry-starved Kerala; its promoter is a close relative of Chief Minister E.K. Nayanar; it is to come up in Kalliassery of Kannur district, Nayanar's native place; and it is tipped to radically transform the economy of the power-strapped northern parts of the state. You'd think a project like this would get clearance at warp speed. Yet, strangely, no other project has run into so many roadblocks, and all put up by the ruling Left Democratic Front (LDF) Government.

The venture in question is the Rs 1,500 crore Kannur Power Project Limited (KPPL), promoted by K.P.P. Nambiar, former secretary in the Department of Electronics and currently head of Namtech Electronics, a Bangalore-based private firm. Since 1995 when he began spadework on the project, Nambiar has obtained more than 97 clearances from the Centre and state—the Kerala Government has even spent Rs 3.5 crore to acquire land—but still hasn't been able to start construction.

State Power Minister S. Sarma is largely being blamed for the delay. It is said that he is more interested in a 1,880 MW liquified natural gas (LNG)-based power project coming up in Ennore of Tamil Nadu, promoted by an Aditya Birla-led consortium. The Kerala State Electricity Board (KSEB) apparently wants to buy 150-200 MW of power from the Ennore project, though there's nothing official about it yet.

Nambiar is furious. "While my request for a commitment for power purchase is hanging in balance for months, why has the minister rushed to Ennore?" he demands. The Opposition is even pressing for a CBI inquiry into the episode. "The CPI(M) has proved once again that it is opposed to the state's interests," says A.K. Antony. According to him, the CPI(M) is bent on 'sabotaging' international projects on ideological grounds. Last year, Nambiar was forced to replace his foreign partner—Enron—following the CPI(M)'s objections. More recently, the Rs 120 crore Asian Public Health Institute proposal by the Johns Hopkins University of the US was shot down by the Government.

This time round, the project has the ruling CPI(M) also divided. On the one side are those led by Nayanar and party Secretary Pinarayi Vijayan, both from Kannur, rooting for KPPL, while on the other is the faction led by two powerful politburo members, Sarma and the Centre for Indian Trade Unions arraigned against it.

The Bottom Line
The battle has stirred up even the normally staid KSEB. According to the MoU signed between KPPL and KSEB, 85 per cent of power produced by the project will have to be purchased by the board. "KPPL power would cost at least Rs 6 per unit," says a board official. For the cash-strapped utility, it means forking out nearly Rs 600 crore. But Chairman Sukumar N. Oommen pitches in for KPPL: "Even if the price is a bit costlier, the state should support KPPL—being Kerala-based it will trigger many other benefits such as industrialisation of the area." According to LDF convenor and politburo member V.S. Achuthanandan, power from KPPL will cost the KSEB more than Rs 6 per unit while that from Ennore will be just above Rs 2 per unit.

Nambiar, who contests the cost calculations, says KPPL will have the lowest capital cost of power generation in India. The plan is to go with naphtha only in the initial months until LNG is supplied from the proposed Rs 2,500-crore Petronet LNG terminal at Kochi. Then the cost of power, Nambiar estimates, would be only Rs 2.06, less than Ennore's price.

Problems began when Nambiar signed a pact with Enron as partner with a 74 per cent equity in the project. Having led a major agitation against Enron's Dhabol power project in Maharashtra, the CPI(M) knew it would be hard put to explain if it allowed the multinational into the state. All India President and CPI(M) Politburo member E. Balanandan is however quick to clarify. "Our objection to KPPL is not because we are against multinationals," he says. It is merely based on the tariff. We don't want our people being forced to pay exorbitant price for power."

Nayanar too maintains that KPPL has not been not shelved. The Government apparently wants to conduct a detailed study before giving it final go-ahead. "We are not opposed to foreign investment," insists the chief minister. "It is during my government's period that the state could attract the largest volume of foreign investment." More to the point, Sarma makes no bones about saying the Government will go for the project taht sells the cheapest power. As things stand, it is clear Ennore scores over KPPL. Unless Nambiar manages to convince the Government otherwise.

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