Punjab, which generates a little more than half the power it needs, is adopting a variant of the Centre’s ultra mega power project (UMPPs) model to develop, at a cost of Rs8,000 crore, a 2,000MW coal-based plant that may be located inside or outside the state.
The Punjab government will not obtain the requisite clearances—this will have to be done by the developer—but will commit to purchase all the power generated from the project, the price for which will be ascertained through competitive bidding. In UMPPs, the Centre obtains all clearances, and buyers (state governments) commit to buying power, often from plants that are not located in their states.
The Punjab government has appointed Rural Electrification Corp. Ltd (REC), one of the two largest lending organizations in the Indian power sector, as a consultant for the project.
“The project will be commissioned within the next four years and REC will be paid a fee for providing consultancy (services),” said a senior Union government official, who did not wish to be identified.
Y.S. Ratra, chairman of the Punjab State Electricity Board, confirmed the development, and said: “The project may be set up within or outside the state and the successful developer will have to make arrangements for fuel, power generation and transmission for the project. The project will be owned by the developer and the state government will buy power from the project.”
Punjab has a power requirement of 11,000MW, of which only around 6,000MW is sourced from within the state.
Abhishek Puri, an analyst with ASK Securities, said: “This is a case-I type of competitive tariff-based bidding, where there is no obligation on the part of the state government to get the necessary clearances for the project. UMPPs follow a case-II type of competitive tariff-based bidding where a special purpose vehicle (SPV) is set up which takes care of all regulatory requirements... The SPV then gets transferred to the developer who getsselected through the competitive bidding.”
The Punjab project is part of an attempt by REC to expand its portfolio. The corporation also has plans to enter power distribution by constructing, operating and owning distribution networks as reported by Mint on 20 September.
The lending major has already filed its draft red herring prospectus for an initial public offering with market regulator Securities and Exchange Board of India for the sale of 156 million equity shares, equivalent to 20% of its paid-up capital.