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Sasan project faces transmission delays

Sasan project faces transmission delays
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First Published: Mon, Feb 11 2008. 11 58 PM IST
Updated: Mon, Feb 11 2008. 11 58 PM IST
New Delhi: The delay in forest clearance for the 4,000MW ultra mega power project at Sasan being developed by Anil Dhirubhai Ambani Group’s Reliance Power Ltd has impacted a related transmission project to be built by Power Grid Corp. of India Ltd, India’s leading power transmission company.
PowerGrid, which has been entrusted with the task of constructing the transmission corridor, says it may not be able to complete the work in time as Reliance Power is yet to commit a commissioning schedule.
The news comes as Reliance Power had a disappointing debut on the stock markets. Its much anticipated shares, part of India’s largest initial public offering of $3 billion, closed 17% below the offer price, dra-gging down all power stocks and adding to a decidedly bearish mood in the markets.
Investors sought $189 billion worth of Reliance Power shares, betting it will benefit from India’s $200 billion plan to provide electricity to a growing industry and more than 400 million people without access to power. But Morgan Stanley, for one, downgraded its rating on Reliance Energy Ltd, the parent of Reliance Power, last month, saying its generation unit was overvalued.
“The transmission project for Sasan will take around four years from now, if work on it starts right away without any further delay. These things cannot be dealt with sequentially and all functions need to be synchronized. These are all linked issues for a complex project that will require a lot of money. The government needs to help the developer with this,” said Arvind Mahajan, executive director at audit firm KPMG.
“The transmission project is at the Public Investment Board stage for clearance,” said a senior PowerGrid executive who did not wish to be named. “With the developer (Reliance Power) not being able to give us a firm commissioning sche-dule, we will not be able to start work on the transmission link. We do not have an immediate schedule of the project’s commissioning. They (Relian-ce Power) are not able to do so as the project is facing forest and environment clearance delays, which has led to land allocation and acquisition issues.”
As per PowerGrid’s internal estimates, it will take 46 months for the completion of the transmission link.
Several attempts to talk to a company spokesman or get responses to emailed questions were unsuccessful on Monday. In an earlier email, a company spokesperson had this to say: “There is no requirement of submission of firm commissioning schedule for the project to the Central Electricity Authority (CEA). The transmission system for the Sasan project is the responsibility of the procurers/PowerGrid, and they are the right party to comment on the schedule of the transmission project.”
The Sasan project, which may require an investment of around Rs20,000 crore, will supply power to Madhya Pradesh, Haryana, Punjab, Delhi, Uttar Pradesh, Uttarakhand and Rajasthan. PowerGrid will build the power transmission network that will carry power generated by the ultra mega power projects. Each power transmission network associated with such a project is estimated to cost Rs4,000 crore.
The Sasan project has already run into issues related to the acquisition and allocation of land on account of forest and environment clearance delays as reported by Mint on 25 January.
At a progress review meeting of the Sasan project, it was found out that forest and environment clearance for a coal mine is a major area of concern. In the same meeting, a representative of CEA, the apex planning body for the Indian power sector, had pointed out that “...schedule in this regard could not be firmed up as Sasan Power Ltd (project SPV) is not giving the firm commissioning schedule.”
He further pointed out that “in case two units are being attempted during the course of 11th Plan (20017-12), firm indication in this regard is required to be provided by the developer without any further delay, otherwise evacuation planning would emerge as a constraint.”
Ultra mega power projects follow a competitive tariff-based bidding where a SPV is set up to take care of all regulatory requirements, so that the developer can start work on the project once it is awarded. The SPV then gets transferred to the developer who gets selected through the competitive bidding process. Analysts believe the government has not been able to keep its promise.
At a meeting called by Prime Minister Manmohan Singh to review power sector issues, environment and forest clearances were discussed in detail and it was observed “the shell companies floated for UMPPs need to fulfil their obligations timely regarding various clearances.”
The high level panel comprising of Montek Singh Ahluwalia, deputy chairman, Planning Commission, finance minister P. Chidambaram, Rakesh Nath, chairman, CEA and B.K. Chaturvedi, member, power, Planning Commission, was also of the view that “an unduly long time was being taken for environment and forest clearances and there was a need to shorten the time frame for grant of the clearance.”
“The forest clearance is currently stuck at the MoEF. The forest advisory committee (FAC, which is constituted by the MoEF) has not passed on its recommendations to the Supreme Court appointed Central Empowered Committee (CEC),” a senior government official involved in the process of awarding environmental clearances, who did not wish to be identified, said.
The project at Sasan, one of the government’s 11 planned ultra mega power projects that were seen as a way to boost the country’s power generation capacity as well as attract private sector investment in power, has been controversial from the start, with the original winning bidder being disqualified and the project being awarded to Reliance Power.
Padmaparna Ghosh contributed to this story.
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First Published: Mon, Feb 11 2008. 11 58 PM IST