India-China border conflict blows up Kerala's attempts to gain additional power

India's retributive sanctions on China, imposed in the name of the country's safety following the Galwan Valley clash, saw popular Chinese apps TikTok, PUBG, ShareIt and WeChat getting banned. But vengeance, it seems, is a two-way street.

This national determination to teach China a lesson has now left Kerala powerless. India's anti-China stance has switched off work on Kerala's two crucial, but long in the making, hydroelectric projects: the 60-MW Pallivasal Extension Scheme, which began in 2007, and the 24-MW Bhoothathankettu Small Hydel Project, which started in 2014.

Both projects, which had suffered half-way desertions and cost escalations over the years, were eventually awarded to consortiums led by Chinese companies. Problem was, the bids were awarded right after India and China very nearly went to war. And the Centre, by revising global tender norms post Galwan, has refused to grant 'political and security clearances' to these Chinese companies to work in Kerala.

KSEB's dilemma
"We have been told that both the External Affairs and Home ministries are unwilling to grant the requisite clearances to these Chinese companies," a top KSEB official said on condition of anonymity. “As a last ditch effort, we are trying to push our case through the chief minister,” the official said.

Reality is, KSEB cannot go ahead with both the projects without the on-site consultancy of engineers from these Chinese Companies (Dongfang Electric Corporation in Pallivasal, and Hunan Zhaoyang Generating Equipment Company in Bhoothathankettu).

Pallivasal: Late-term abortion
The Pallivasal Extension Scheme, unlike the Bhoothathankettu project, is at an advanced stage. The Extension Scheme, designed to utilise the massive spillage from the Pallivasal dam especially during the rainy periods, involves the erection of two machines of 30 MW capacity each. It will also augment the efficiency of the existing 37.5 MW Pallivasal Project, the first hydel station in Kerala.

One of the machines had already been erected, and the main parts of the other machine had already arrived from China. "What remains to be imported are some accessories," the official said. Most of the equipment required for the extension scheme had reached Kerala by 2016 itself.

This happened when the work was with a consortium that had the same Chinese company, Dongfang Electric Corporation, as the main supplier. This consortium, which also had the Essar Group, was shown the door in 2018 after it demanded cost escalation; it asked for a revised rate that was four times the original contract.

After this, the incomplete extension project could not be awarded to anyone as no fresh tenders attracted more than one bidder; if there is only one bidder, the norms insist on a re-tender. The project was re-tendered at least four times.

Pallivasal bidders and TikTok ban
Finally, two months after fighting broke out along the Line of Actual Control, in August 2020, there came two bidders, both consortiums having Chinese suppliers; SSIPL - Allonward Consortium (Shri Saravana Industries Private Limited and Hunan Allonward Hydro Generating Equipment Co Ltd, Torch City, High-Tech Development Zone, Changsha City, Hunan Province, China) and TVPPL-KSK-REHPL-DEC Consortium (Tavasya Venture Partners Private Limited, KSK Fabricators and Erectors Private Limited, Raajratna Energy Holdings Private Limited and Dongfang Electric Corporation Co. Ltd., China).

By then, economic sanctions against China were already in place. On June 29, 59 Chinese mobile applications including TikTok and WeChat were banned. And on July 23, the Centre had amended the General Financial Rules, 2017, to prevent Chinese companies from entering the Indian market. At this stage, China was still keeping alive the military threat. Contrary to claims, it refused to pull back its troops from their intrusive positions at Hot Springs and Gogra in East Ladakh along the Line of Actual Control (LAC).

Power deal in the time of war
Nonetheless, on October 5, 2020, the consortium that quoted the lowest (Rs 67.07 crore), the one with Dongfang Electric Corporation (DEC) as the main supplier, was picked to resume the work on the Extension Scheme. KSEB considered this helpful because the parts that had already arrived, and those that had already been used for installation, were supplied by the DEC.

At this stage, the blacklisting of popular Chinese products was intensifying. And China kept cranking up the provocation.

A second set of Chinese apps, this time 118 of them including PUBG, was banned on September 2. Less than a week later, China said it had never acknowledged Arunachal Pradesh as India's. And by the end of the month, it said it did not recognize the "illegal" Union Territory of Ladakh.

KSEB's strange optimism
A day after the DEC-led consortium was picked (October 5), the Kerala Government had to bow to the Centre's diktat and adopt a crucial policy decision. On October 6, it issued a circular saying that the new Central government restrictions on securing goods and services from China will be applicable to all PSUs, local bodies and agencies controlled by Kerala. Pallivasal and Bhoothathakettu were, effectively, doomed.

Yet, on October 9, the KSEB held discussions with the DEC-led consortium extracting an assurance that the work would be completed in a time-bound manner "even if the political tension between the two countries persists and Government of India disengages contractual relations with China fully."

This was misplaced optimism. It was not clear how KSEB could extract such an assurance from a Chinese partner when the final word about internal matters in India rested with the Central government.

Not surprisingly, the Chinese-led consortium could not keep its word as the Centre refused to let the DEC's engineers into India. “Any dealings with them, we were told, would be deemed a criminal offence,” the official said.

In earlier discussions with KSEB, the DEC officials had said they could complete the work in eight months from the moment they got the political clearance. Had it not been for the Galwan skirmish, the Pallivasal Extension Scheme would have been commissioned by the middle of May this year.

Last option: Dismantle and restart
Given the situation, the KSEB had hoped that online consultancy would be a way out. “Online management has been ruled out,” the official said. “The remaining work involves the installation of control and protection systems and these are proprietary products on which the China partner will have sole control. They will not even share the passwords with us. So their engineers will have to be on the site to do the job,” the official said.

The only option left to take the project forward is to dismantle the machines, take out all the Chinese parts, and start anew. It will be like planning for a second 60-MW Pallivasal Extension Scheme on the ruins of the nearly-complete old one. Even assuming that KSEB gets the right bidders, does the public utility have the financial strength to lift the additional bill?