The delay in acquiring forest land for the 4,000MW ultra mega power project (UMPP) at Mundra being developed by Tata Power Co. Ltd may have a cascading impact on a related transmission project for sending power to customer states.
Mundra becomes the second project to face problems over acquisition of forest land after Sasan, which is being developed by Anil Dhirubhai Ambani Group’s Reliance Power Ltd. Mint reported the Sasan transmission delays on 11 February.
Both delays add to India’s stumbling bid to fix its acute power shortage as the ultra mega projects are a key component of the government’s plan to significantly boost power generating capacity.
“Due to land issues, Tata Power is yet to give the ‘notice to proceed’ to the procurers (states that will buy power from the Mundra UMPP). In the absence of the notice, the transmission project to be build byPower Grid Corp. may get delayed. Tata Power wants the entire land for the project before issuing this notice,” said a senior union government official who didn’t want to be named.
In an email response to Mint, Tata Power wrote: “This project is way ahead of its contracted schedule. Forest land is a procedural issue and will be solved in due course. All the associated facilities, like transmission, are also being planned as per the accelerated schedule. Finally as per PPA (power purchase agreement) we had to put the 1st unit in 68 months from April 07 (Aug 2012), while now we are talking about June 2011 as 1st unit commissioning. So this reinforces that the project is way ahead of its contracted schedule.”
There appears to be one small hitch. Power Grid believes it will need about 48 months to complete the transmission network from the time it gets a schedule, in this case from Tata Power.
“We do not have a fixed schedule of the project’s commissioning,” said a Power Grid executive who also didn’t want to be named.
“We are waiting for a revised schedule and (from then), it will take us 48 months for the completion of the transmission project.”
It appears that even if Tata Power were to close all pending issues this week, an extremely unlikely scenario, the earliest Power Grid can, in turn, complete its end of the bargain—a transmission system—will be March 2012, some nine months from when Tata Power says the first unit will be commissioned.
While completion of the project is the responsibility of the developer, in this case Tata Power, the transmission system for all such projects is the responsibility of the procurers of power and Power Grid.
The total land requirement for the Mundra UMPP is 1,243 hectares (ha) of which, around 130ha of land and some private land is yet to be acquired.
The Mundra project, which may require investment of Rs16,000 crore, is to supply power to Gujarat (1,600MW), Maharashtra (800MW), Punjab (500MW), Haryana (400MW) and Uttar Pradesh (300MW).
“Forest clearance for the 130ha. is yet to be given and hence the delay. The transmission projects for both 4,000MW Sasan UMPP and Mundra have received the public investment board approval that will require an investment of Rs10,000 crore. Work on them cannot start in the absence of this notice,” the same official said.
However, in the case of another project at Krishnapattnam in Andhra Pradesh, land has already been acquired.
These projects follow competitive, tariff-based bidding process where a so-called Special Purpose Vehicle (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 winning bidder.
“These things cannot be dealt with sequentially and all functions need to be synchronized. The government needs to keep its commitment on environment and forest clearances and land acquisition. The private sector has kept its part, it is now for the government to keep its. In the current scenario, there is no fair sharing of risk. Any delays has a significant implication in terms of cost and timelines,” said Arvind Mahajan, executive director at audit firm KPMG.