The government plans to introduce tighter eligibility criteria for companies wishing to build multiple ultra mega power projects (UMPP) in an attempt to ensure their timely completion, prevent companies from bidding for them merely as a pre-emptive measure, and avoid controversies such as those that have dogged some earlier projects.
If the government goes ahead with its plan, companies wishing to build more than one project will have to possess the incremental net worth or raise their net worth to do so. Current guidelines related to UMPPs state that bidders need to have a minimum net worth of Rs2,000 crore.
The new criteria requires a company that is already working on one UMPP to have an extra net worth of Rs2,000 crore (or a total net worth of at least Rs4,000 crore) if it wishes to bid for another project. And a company with two UMPPs under its belt will need to have a minimum net worth of at least Rs6,000 crore before it can bid for a third project.
POWER PLAY (Graphic)
Each of the UMPPs have a capacity of 4,000MW and requires an investment of between Rs16,000 crore and Rs20,000 crore. “We plan to do this as we do not want developers to take as many projects they can and then not be able to deliver on the commissioning date. We plan to modify the request for qualification (RFQ) criteria. This will not be applicable for the Tilaiya UMPP, but for the remaining UMPPs,” said a senior government official who did not wish to be identified.
The government has already called for bids for the Tilaiya project in Jharkand, and 13 firms are in the fray.
Reliance Power Ltd (RPL) has been the most successful company in terms of UMPPs. It has already been awarded the project at Sasan, Madhya Pradesh, and has emerged the winning bidder for the Krishnapattnam project in Andhra Pradesh—the project has not been formally awarded to it. The UMPP at Mundra in Gujarat has been awarded to Tata Power Co. Ltd.
“One of the options we had was to limit it to two projects per developer. However, we found this approach to be better,” the government official added.
An RPL spokesman declined to comment on the development.
Power sector analysts said that while the government’s proposal may not affect big power sector developers, it will affect companies with smaller balance sheets who may not be able to take on more than one such project.
“It is a good move as currently one’s net worth could be used for bidding for multiple projects. This will stop now. This will also establish the bidding capacity of a developer,” said a New Delhi-based power sector analyst who did not wish to be identified.
Apart from Tilaiya, the other UMPPs yet to be awarded are Cheyyur in Tamil Nadu, and Jharsuguda in Orissa.
NTPC Ltd, Sterlite Industries, Tata Power, Jindal Steel & Power, Essar Power, GVK Power & Infrastructure, AES and RPL are among the 13 companies that have submitted their RFQ applications for project at Tilaiya. G.V. Krishna Reddy, the chairman of GVK Power, said the government’s move would increase “chances of timely completion of the projects”. “It is not fair for a developer to take as many as projects he can and then not develop it on time,” he added. A senior executive at NTPC, who did not wish to be identified, echoed Reddy’s sentiments.
UMPPs are critical to the government’s efforts to enhance the country’s power generation capacity to fuel the needs of an economy that is expanding at more than 9% a year. Currently, India has a power generation capacity of 135,000MW and it expects to add a capacity of 78,577MW by 2012.
The government’s UMPP programme has had its fair share of problems. Of the 10 proposed projects, six are on track. The Union government is expected to abandon plans to set up UMPPs at Girye in Maharashtra, Tadri in Karnataka, and Akaltara in Chhattisgarh for reasons ranging from environmental concerns to differences with the state governments.