New Delhi: NTPC Ltd has decided to part ways with the Indian Railways over a plan to set up a captive power plant in Union railway minister Mamata Banerjee’s home state of West Bengal as the two were unable to agree on ownership. The railways is looking for a partner to set up the power plant.
While the railways and NTPC had entered into initial talks for the 1,320MW Adra project that was announced in the 2009-10 Railway Budget, India’s biggest power generation utility said it wanted more than the 26% stake that was being offered.
“They didn’t want to go forward with us for the project. They wanted us to be the minority partner for which we were not ready,” said a senior NTPC executive who did not want to be identified.
NTPC is already developing a 1,000MW project at Nabinagar in Bihar in a joint venture with the railways through a company called Bhartiya Rail Bijlee Co. Ltd.
Apart from reducing the dependence of the country’s largest passenger and goods mover on power supplied by state electricity boards, which is costly and often erratic, the Adra project in Purulia district is also aimed at providing employment.
Banerjee’s Trinamool Congress (TC) is the main opposition party in the state, where elections are scheduled to be held next year.
The railways has appointed a consortium of consultants, including PricewaterhouseCoopers, as advisors to the project. They are currently engaged in drawing up a detailed project report.
“The developer will be selected through open competitive bidding and NTPC was welcome to bid for the project. Anybody who has a captive power plant should fulfil two conditions—26% equity and should draw at least 51% of the power. If it is captive, cross subsidy is not payable and so power is cheaper,” said a senior railway ministry official aware of the development but who did not want to be identified.
The railways currently uses some 12 billion units of electricity a year with consumption growing at an average 5% every year.
Buying from state electricity boards is costlier as commercial subscribers such as the railways pay more to make up for power supplied at subsidized rates or for free such as that for use on farms. The railways pays an average of Rs4.29 a unit to run locomotives and Rs4.37 a unit for other purposes.
“The preparatory activities for the Adra project are on and the private partner will be selected within six months,” said a person who did not want to be identified.
The Planning Commission, India’s apex planning body, has recommended that the railways buy power from independent producers or get the private sector to establish power plants rather than rely on the state electricity boards.
“NTPC still makes the best bet for the railways and the two parties should try to evolve a win-win proposition. Having a majority stake allows a company to have operational freedom,” said Gokul Chaudhri, partner at audit and consulting firm BMR Advisors.
The utility has a power generation capacity of 31,134MW, which it plans to ramp up to 50,000MW by 2012. It registered a net profit of Rs8,656.53 crore last fiscal on a turnover of Rs45,255 crore.
NTPC’s stock rose Rs1.25, or 0.61%, to Rs206.20 at the Wednesday close on the Bombay Stock Exchange. The benchmark equity index, the Sensex, rose 54.28 points, or 0.32%, to 17,195.81 points.