Despite lobbying by the Union government, Arunachal Pradesh has cancelled state-run power utility NTPC Ltd’s contract to build two hydroelectric power projects in the state at an estimated cost of Rs22,500 crore.
“We have withdrawn the Etalin (4,000MW) and Attunli (500MW) projects from NTPC. Other private sector developers, such as Reliance Power Ltd, Jaiprakash Associates Ltd and Satluj Jal Vidyut Nigam Ltd, have shown interest in taking up these projects for development. Some of these companies are even requesting us to develop these projects in a joint venture with us,” Arunachal Pradesh’s power secretary T. Norbu said.
NTPC, however, is not giving up. “We will not leave the projects and let it go away like this,” said its chairman and managing director R.S. Sharma.
On behalf of NTPC, the Union power ministry had asked the state government not to ask again for bids for the projects.
While Manoj Gaur, executive chairman of Jaiprakash Associates, and a Reliance Anil Dhirubhai Ambani Group spokesperson declined comment, officials at Satluj Jal Vidyut Nigam could not be contacted.
NTPC had signed an agreement on 21 September 2006 with the Arunachal Pradesh government to implement the projects. Other state-owned firms that won similar projects from Arunachal Pradesh at the same time were NHPC Ltd (4,500MW) and North Eastern Electric Power Corp. (1,230 MW).
The state cancelled the contract after NTPC, India’s largest power generation company, refused to pay an advance of Rs5 lakh per megawatt as upfront payment for the two projects, as reported by Mint on 19 February. While state-owned NHPC paid up, NTPC declined, citing Central Vigilance Commission guidelines.
“Time is of the essence. We have already lost 17 months and NTPC is not keen and committed to developing the projects,” Norbu said.
“It is big setback to NTPC. Its hydro plans as well as thermal programmes are not progressing. The Arunachal state government’s stance has always been to treat public sector undertakings (PSUs) and private sector developers on an equal footing. It is fundamentally difficult for the PSUs to accept these decisions,” said Anish De, chief executive officer at Mercados Asia, an energy consulting firm.
The move, besides being an embarrassment, will also affect NTPC’s plans in the hydropower sector. It has bet big on hydroelectric generation in an attempt to become an integrated energy utility with a diversified fuel mix.
The company has a power generation capacity of 29,144MW, which it plans to increase to 50,000MW by 2012.
Of the 22,596MW it plans to add, 2,806MW will be from hydropower. It registered a net profit of Rs7,129.30 crore on revenues of Rs37,004.60 crore in 2007-08.
According to apex power sector planning body Central Electricity Authority, Arunachal Pradesh has hydropower potential of around 50,328MW, the highest in the country.
It is easier to set up a thermal power plant than a hydroelectric project because it is more difficult to prepare detailed project reports, react to environmental surprises such as floods, and deal with thorny issues of relocation and resettlement, all of which delay these projects, typically located in mountainous and hostile terrain.