From First to Failed: Maheshwar Dam Headed for Auction

The Maheshwar Dam, built on the Narmada River, holds several distinctions. It was India’s first private-sector-led hydropower project and is now set to become the first dam to be auctioned. The National Company Law Tribunal (NCLT) has confirmed its possibility in a decision on 11 July 2025. Power Finance Corporation had filed a case in the tribunal against Shree Maheshwar Hydel Power Corporation Limited (SMHEC); the company managing the dam faced issues due to loan irregularities and failure to complete the project. To resolve the matter, NCLT gave a 180-day grace period. However, this period kept getting extended and crossed the legal time limit. Now, the tribunal has decided to help the lenders recover their money.

First Public-Private Partnership

Maheshwar Dam was the first dam in the country to be built under a public-private partnership. The Narmada Valley Development Authority (NVDA), the agency responsible for development in the Narmada Valley, first conceived the project in 1978. In 1989, the Madhya Pradesh State Electricity Board took responsibility for its construction. But in 1993 itself, the project was given to S Kumar, a company whose principal business is textiles.  

In 1996, the state government signed a Memorandum of Understanding (MoU) with this company. According to this, the construction, commissioning, operation, and maintenance of the dam were to be done by S Kumars. This company had a 33% stake in Shree Maheshwar Hydel Corporation Limited (SMHCL). The remaining shares were given to other multinational companies.

Two reasons were given for involving a private entity in a public project. First, completing this project would require a huge cost, which the government does not have. Second, if the construction work is done by a private player, the construction will be completed on time, and power generation will start soon. But even after 31 years since 1993, this dam could neither be completed nor could it generate even a single unit of power.

Alok Agrawal of Narmada Bachao Andolan says that he had opposed this dam from the very beginning. There were two main reasons for this: firstly, the estimated cost of the electricity generated from this dam was very high, and secondly, a large number of people were going to be displaced due to this.

This project in Khargone's Mandleshwar, which is about 70% complete, was going to affect about 60,000 people and 61 villages. The affected families whose more than 25% of land was going to be submerged were to be given land between 5 to 20 acres as compensation. Also, every village affected by this was to be settled in one place.

Struggle for Rehabilitation 

The installed capacity of this dam was to be 400 megawatts. In the 1990s, the cost of electricity produced from this was estimated to be Rs 9 per unit. Whereas the cost of electricity produced from the Indira Sagar and Omkareshwar dams built on the same Narmada River was Rs 3 per unit.

Even the people who were going to be displaced by this project were not given clear information about the dam. While the initial surveys were done by the government officials, the villagers were not told clearly that a dam was to be built. Later, they were informed about it by the Narmada Bachao Andolan. 

This administrative attitude led to further protests. On 11 January 2000, 1500 people were arrested for peacefully protesting at the dam site. These included Booker Prize-winning author Arundhati Roy.

The Narmada Bachao Andolan continuously agitated and corresponded to stop its construction. Taking cognizance of one such correspondence, the Union Ministry of Environment and Forests issued a show cause notice to SMHEC on 17 February 2010 under the Environment (Protection) Act 1986. Not being satisfied with the reply given by S. Kumar, the Union Ministry issued a stop-work order on 23 April 2010 to halt the development.

However, the then Chief Minister Shivraj Singh Chauhan wrote a letter to the Prime Minister's Office against this, after which it was decided in the meeting that this order will not be applicable on the 7 gates of the dam that were already installed, but work cannot be done on the 5 gates that were not installed till then.

The central ministry said that further work on the dam should not be carried out until the rehabilitation of the people affected by the project is completed. In 2011, the state government submitted a report stating that 70% of the people had been rehabilitated, but the Centre did not agree with this.

According to Agrawal, even today, the rehabilitation of 85% of the people has not been completed. Due to this, the work of this dam kept getting delayed and the cost kept increasing. Due to this, SMHEC took a loan of about 1900 crores from many government institutions, including Power Finance Corporation. Whereas SMHEC itself invested only 499 crore rupees.

Financial Irregularities and Bankruptcy

While there were continuous protests against this project by the movement, many government reports also revealed financial irregularities related to it. CAG had exposed financial irregularities related to this project in its reports of 1998, 2000, 2003, and 2005.

In a 2014 CAG report, the government was criticised for not terminating the project despite the delay in its completion. According to an estimate of September 2015, due to this delay, the cost of the project had reached Rs 4635 crores, whereas its initial cost was estimated to be Rs 1569 crores.

However, on 18 April 2020, Madhya Pradesh Power Management Company Limited (MPPMCL) cancelled its power purchase agreement with SMHEC. In a letter issued by the state government's MPPMCL in this regard, it was said that the per unit price of electricity generated from this project would be Rs 18, which is 'abnormal and very high, much beyond the initial estimations or the agreed cappings.'

After this, on 27 September 2022, the then Chief Minister Shivraj Singh Chouhan announced that the state government is cancelling all types of agreements with SMHEC. Meanwhile, Power Finance Corporation filed an appeal against SMHEC in the National Company Law Tribunal under the Corporate Insolvency Resolution Process (CIRP).

To understand this appeal in simple terms, Power Finance Corporation initiated legal proceedings to declare SMHEC bankrupt to get its money back. Under the law, SMHEC was given 180 days to save itself from bankruptcy and find a solution to the matter. This period got extended to a total of 840 days, which is rare in such a case. This time, SMHEC demanded to extend this period again, which the tribunal rejected and gave the recent order.

At present, the wall of this dam has been completely built. 3 out of 10 turbines have also been installed in the dam. Apart from this, the company has only acquired land from the villagers as its property. Now, the outstanding amount of the creditors will be paid by auctioning these assets. Explaining the further process, Advocate Amol Srivastava says,

“In such cases, the tribunal declares the company bankrupt and appoints an official liquidator. It is he who takes forward the process of auctioning the company.”

But now the question is whether this dam built on the Narmada will be decommissioned? Will this dam be demolished? And the biggest question is what will happen to those whose land has been acquired? After the decision, the affected villagers reached the Mandleshwar SDM office and submitted a memorandum in the name of the Chief Minister. The villagers demand that the work of the project be restarted and the displaced people of the remaining villages should be given immediate rehabilitation and compensation.

Ground Report tried to contact the officials of Madhya Pradesh Power Management Company Limited for an official response on this, but no response was received from them. We are trying for this, and the news will be updated when we get a response.

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