Power projects face delay over profit sharing, location

Utpal Bhaskar


Three large power projects with generation
capacities of 4,000MW each face delays following
objections from state governments over issues such
as profit sharing and location.

The proposed plants in Orissa, Tamil Nadu and Chhattisgarh
are part of the Union government’s ambitious plans
to set up large power generation capacities through
its ultra mega power project (UMPP) scheme.

The government had aimed to issue requests for
qualification (RFQs) for these projects at Cheyyur
(Tamil Nadu), Bedabahal (Orissa) and Akaltara
(Chhattisgarh) in 2009-10.



Ambitious plans: Power secretary H.S. Brahma said
there were issues and added that state govts had to
cooperate to finish projects on time. PIB
“While the Tamil Nadu tourism ministry has objected
to the project site, the Orissa government wants a
sharing in the annual profits of the developers to
the tune of 5% per annum. How is this possible?”
said a senior government official.
“In the case of Akaltara, a new water reservoir
has to be built to provide water linkage to the project.
Given these problems, no UMPPs can be awarded this year.”

The official did not want to be identified.

Power secretary H.S. Brahma confirmed there were
some issues with these projects but said,
“These problems will be sorted out...
The state governments’ cooperation is
very necessary for the projects to go ahead
within a given time frame.”

UMPPs follow a competitive tariff-based bidding
in which a special purpose vehicle (SPV) is set up
to reduce risk perception and increase investor confidence.

This SPV takes care of regulatory requirements such
as land acquisition and environmental clearances
and transfers these to the winning bidder.
Each project requires an investment of Rs16,000-20,000 crore.

The UMPP scheme has had its share of problems;
projects at Girye in Maharashtra and Tadri in
Karnataka had to be abandoned due to local resistance.

Satnam Singh, chairman and managing director at
Power Finance Corp. Ltd, the nodal agency for
awarding the projects, maintained that the RFQs
would be issued in the current fiscal year.

“The RFQs will be issued in this financial year.
If some issues come up they will be resolved as
has happened in the past. There are so many
involved in the process and these issues are being
at the highest level,” Singh said.

UMPPs are critical to the Congress-led United
Progressive Alliance government’s efforts to enhance
the country’s power generation capacity to fuel the
needs of an expanding economy. Currently, India
has a power generation capacity of 150,000MW
and expects to add 78,577MW by 2012.

Of 14 such UMPPs planned, the government has
so far awarded four projects. Tata Power Co. Ltd
has won the Mundra UMPP in Gujarat and
Anil Ambani’s Reliance Power Ltd the projects
at Sasan in Madhya Pradesh, Krishnapatnam in
Andhra Pradesh and Tilaiya in Jharkhand.

“There is a struggle to move the concept beyond a
first few projects. The challenge, which is emerging
in these large projects, is that something will have
to be sacrificed to get these projects moving,” said
Gokul Chaudhri, partner at consultancy firm BMR Advisors.

“The country needs to take a decision about
what it is willing to sacrifice in its list of priorities
to get the much required power in the country.
The question is how to reach that balance?
An ideal situation that involves no environment
cost doesn’t exist,” he added.