Suzlon and Bollywood (and Pachauri too)

We have already seen North track down the trail that leads from Suzlon’s Tulsi Tanti to RK Pachauri . While the meteoric rise and somewhat less spectacular fall of Suzlon is known, new readers might be interested in a fresh perspective on certain parts of the whole story. Details that are not widely known emerge — of movie superstars willing to campaign against climate change and put their money where their mouth is.  Actors and actresses strive to bail out floundering windmill sellers and keep their own interests afloat in the process.

Even after the Kyoto protocol, many Indian states were unwilling to support wind-power as a reliable addition to the power grid. In their bid to create conditions conducive for ‘alternative energy sources’, the centre and state governments created a heady mix. These included  depreciation benefits, tax benefits, money from the ‘clean development mechanism’ and easy environmental clearance. Tracking the trajectory of the company, one sees how each of these rungs Suzlon planted its feet on became slippery or came undone, leaving the company hanging where it is today.

Similar policies had existed a decade earlier in India. This resulted in a picture of rapid wind installation from 1992, which tanked sharply in 1996 when a certain minimum alternative tax was introduced. It soon dawned on everyone that companies were attracted more by the depreciation and tax benefits than the electricity generation aspects of wind power — meaning the propped-up windmills were mere money-spinners not credible energy sources.

The equation however appeared changed post-Kyoto, due to two reasons — the glint of money to be had through the Kyoto ‘clean development mechanism’ and the financial assets available due to the economic boom at the time (for the market response to Suzlon’s initial IPO, see here). The company thus found itself with excess cash, the confidence that comes with a fat portfolio boasting numerous installations, but technologicaly not very dissimilar to the previous industry cycle of the early 90s.

Celebrity Windmills

The peculiar legislative pre-conditions laid a trap for those with excess liquidity issues to be drawn to wind power. We now note that, wind power or more specifically Suzlon had attracted the attention of Aishwarya Rai and Sachin Tendulkar. By 2005 Aishwarya was at the peak of her prowess, cash at hand which her handlers advised appropriately enough, to invest in Suzlon – due to the aforesaid benefits. Her maiden venture was in Rajasthan, a ‘small’ project in three villages – Sodamada, Hansuwa and Baramsar in Jaisalmer district, Rajasthan. Jaisalmer is to Rajasthan’s west, bordering Pakistan, a fact which will pop up again surprisingly. The initial investment was $ 2.4 million dollars. After initial hiccups requiring two visits to the scorching desert by the star herself, the project got off the ground. Aishwarya in all probability got her wish with her site change request from Sodamada to Kotri ( link). One can only assume that her letter written the previous year to RREC‘s Rakesh Verma to do so, was to sidestep issues of ‘debundling’ which would allow the project to generate credits under the ‘clean development mechanism’. In all, Suzlon has declared to potential investors and students (scroll down to page 58) that Aishwarya has invested a total amount of 5 million dollars. It is no wonder that the Ministry of Non-Conventional Energy Sources committed the inelegant Freudian slip of referring to  Aishwarya, among others as ‘moneybags’, in their Sept 2005 newsletter.

Kotri, Rajasthan

Shadows of wind turbines in Kotri, Rajasthan

While everything is hunky-dory till now, the spluttering pathos starts unfolding for Suzlon and its benefactors here on. In April 2006, the Income Tax Department suddenly conducted a nationwide day-long raid on all Suzlon offices and installations – numbering 35. It was a simultaneous visit by 130 IT officials across 8 regions – clearly a major exercise. The reason: a “mismatch between investments in wind projects and actual wind power generation” and a “possible misuse of depreciation and tax rebates”. More specifically, one IT official said that there were “… immediate claims of depreciation and tax rebates by investors without actual installation or generation of power”. Multiple companies had apparently sold the windmills over and over again, claiming depreciation benefits each time. The same drama that took place in the early 90’s repeated itself, only it blew up in Suzlon’s face. It also offers a glimpse into the mind of Suzlon and their pattern of business thinking. For it is hard to imagine that Suzlon would have been unaware of its clients selling wind turbines repeatedly for government handouts. The estimated cost to the exchequer: anywhere between Rs 700-1000 crores ($150-210 million).

Whither TERI

The discernible assistance from TERI to Suzlon is brief, indirect and minimal, but it exist nonetheless. In 2008 we find a helpful TERI, enabling Suzlon to seal the deal on a 21MW project in Gujarat. Wind turbine projects in India, do not need an environmental impact assessment as they do not come under the list requiring clearance and “whose investment is less than Rs. 1000 million” (link ). TERI evaluates the technical bids for the project “recommending disqualification of Vestas RRB bid for inadequacy and acceptance of Suzlon techno-commercial bid”.

Pachauri in Pakistan

How does Pachauri chip in? By broad strokes – expanding the reach of the whole wind power industry to newer domains, of course. The trail starts with the fact that Suzlon appears to have studied the Pakistan wind energy market. This is surprising for one reason – it was always assumed (and rightly so) that stable governments and regulations are the prime requisite for successful installations – a pre-condition that is shaky as ever, given the fluid nature of Pakistani politics and Indo-Pak relations. We find, in a Suzlon presentation detailing the prospects of countries eligible under the CDM that Pakistan figures prominently. Suzlon notes that “imported equipment for…energy generation is exempted from tax and the risk of less-than expected wind speeds is accepted by the government”. Writing in ‘tbl’, Miriam Katz dutifully explains that Pakistan has winds blowing near major cities – a very attractive proposition. Riaz Haq notes in his energy blog that “Pakistan is also fortunate that in neighboring India, the company Suzlon manufactures wind turbines, thus decreasing transportation costs” and that Suzlon blades “start rotating at 3 m/s” while Vestas ones do so at 4 m/s.

It is thus in this light that Pachauri’s recent visit to Pakistan in January last year should be viewed. As a promoter and facilitator of mutual business interests between India and Pakistan, rather than a neutral advocate of climate science. Because in Pachauri’s own words as he addresses those gathered in Islamabad, Pakistan “… is responsible for only a small fraction of global warming” and “emits 1/35th of the world’s CO2”. Nevertheless, Pachauri reels out his climate alarmism with abandon. Using talking points issues suitable for a Pakistani audience, namely – droughts, floods, lack of precipitation. He even declares at one point  that millions will be affected by diarrhea; the tirade culminates in Pachauri’s declaration – “Pakistan faces potential environmental catastrophe”. It is unclear whether he talked about meat consumption. He finishes with his punchline, his money shot if you will – a call for “new investments in adaptive responses” .

The conference titled aptly “Regional conference on climate change: challenges and opportunities for South Asia” is sponsored by familiar players – International Union for Conservation of Nature (IUCN), Pakistan, the UK Department for International Development (DFID) and the Norwegian Embassy. It is notable that Pachauri participated in Pakistan-specific alarmism as late as December last year.

What investments is he talking about – one wonders? Pachauri as is his wont tells us himself. He declares “adaptation alone is not sufficient, stabilization and mitigation strategies are also required”. Getting warm. He adds: “adaptation could be achieved by turning to renewable energy technologies”. Even warmer. He finishes with: “The most promising of these are hydropower, solar, wind and biomass”. It is not for nothing that the President hosted a luncheon in his honor — truly a rare honor.

Suzlon and Bollywood – the toxic dance

The final blowback to Suzlon happened as the behind-the-scenes deals of the company with the Bollywood team and their politician friends comes to light. In early June 2009, the tribals in the N-D area in Maharashtra are up in arms against Suzlon for selling what they thought was their land. Within a week, the issue exploded in the Maharashtra assembly when it is announced that Suzlon has been buying tribal and forest land and selling it off to celebrities for years. Who were these celebrities? Aishwarya Rai, Amitabh Bachchan, Twinkle Khanna (wife of Akshay Kumar) and Amar Singh. Suzlon, we learn has allegedly bought tribal land 2006-onwards for a total sum of Rs 300 crores and then sold it off for a amount totalling Rs 5000 crores ($1.1 billion). The continuing cash-crunch at Suzlon as it struggled post-Hansen, combined with the vasts sums of money evidently at the disposal of the Bollywood Team into whose circle Suzlon gained access, apparently had  both parties making windfall. Until the tribals protested. Caught with its pants down, the ruckus in the Assembly was handled by the company even worse. Attempting to explain things to the people (read investors) directly, Suzlon published newspaper advertisements rubbishing the claims of the state government enraging the Opposition and bringing a privilege motion passed in the Assembly upon itself. Suzlon understandably, has denied all allegations

The illegal land deals resulted in a First Information Report filed against Aishwarya Rai at the Nashik Police station. For Aishwarya who was already on the bad side of the wind investment debacle, the ultimate irony had already transpired. Six months ago the local IT department had came knocking for non-payment of taxes on returns from her windmills. A charge which was vigorously denied by Aishwarya’s father, Krishnaraj Rai who is probably the proprietor of said project. Curiously enough he stated that “Suzlon has assured” him that no taxes were due. If true, this implies that Suzlon was handling the finances of its wind turbine installations for its own clients – a very laudable corporate practice indeed!

Postscript

These revelations bring several facts to life. Firstly, it shows up the corrupting influence of reckless tax exemption provisions and concessions to the green wind turbine industry. These measures of dubious virtue attracted this coterie of businessmen and businesswomen masquerading as movie actors, who move in a tight circle protecting and nurturing their interests. Top actors, by virtue of 6-7 digit figures they command and the never-ceasing endorsement deals that keep the cash flowing, end up creating a currency vortex which then fed the said industry. They are not the only players, but certainly the most pretty and therefore the visible ones.

Secondly, the market distortion that the numerous concessions to the wind power industry produces stretches credulity. As Down to Earth magazine notes – ‘Nobody quite knows the cost of a windmill’.  The technology is expensive enough that, after showering both parties with concessions – the electricity boards and the Suzlons – governments are forced to buy back the power at hiked rates and then sell it to the public. Companies like Suzlon go hunting globally for similar legislative conditions , which they term ‘favorable market conditions’ when they actually have very little relation to the term ‘market’ or actual unprotected exposure to market risks in the power industry. People like Pachauri merely set the stage, drawing on the authority of the IPCC to open up new countries.

Thirdly, with the tribal land fraud allegedly committed by Suzlon, it is obvious that environmental degradation and displacement of tribals – both of which are pet concerns of the green movement can be brought about just as well by a windmill company, as can be by a mining project. One has to teargas uncooperative natives and arrest little girls to build wind turbines too, not just coal mines. The very fact that Suzlon was willing to head in this direction, selling land to its celebrity friends outside the bounds of law, is not surprising at all. After all if these celebrities were just investing in windmills it would hardly be illegitimate. What they do with their money one could say, is their business. But the fact that this team made an effortless transition to buying forest land at throwaway prices under highly questionable circumstances shows that they viewed the entire exercise as a single game.

Are they corrupt and evil money-grubbers and nothing else? Of course not. But that would be missing the point too.

Advertisements