Power projects face delay over profit sharing, location

Power projects face delay over profit sharing, location
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First Published: Tue, Sep 29 2009. 01 15 AM IST

Ambitious plans: Power secretary H.S. Brahma said there were issues and added that state govts had to cooperate to finish projects on time. PIB
Ambitious plans: Power secretary H.S. Brahma said there were issues and added that state govts had to cooperate to finish projects on time. PIB
Updated: Tue, Sep 29 2009. 10 14 AM IST
Kochi: Three large power projects with generation capacities of 4,000MW each face delays following objections from state governments over issues such as profit sharing and location.
The proposed plants in Orissa, Tamil Nadu and Chhattisgarh are part of the Union government’s ambitious plans to set up large power generation capacities through its ultra mega power project (UMPP) scheme.
The government had aimed to issue requests for qualification (RFQs) for these projects at Cheyyur (Tamil Nadu), Bedabahal (Orissa) and Akaltara (Chhattisgarh) in 2009-10.
Ambitious plans: Power secretary H.S. Brahma said there were issues and added that state govts had to cooperate to finish projects on time. PIB
“While the Tamil Nadu tourism ministry has objected to the project site, the Orissa government wants a sharing in the annual profits of the developers to the tune of 5% per annum. How is this possible?” said a senior government official. “In the case of Akaltara, a new water reservoir has to be built to provide water linkage to the project. Given these problems, no UMPPs can be awarded this year.”
The official did not want to be identified.
Power secretary H.S. Brahma confirmed there were some issues with these projects but said, “These problems will be sorted out... The state governments’ cooperation is very necessary for the projects to go ahead within a given time frame.”
UMPPs follow a competitive tariff-based bidding in which a special purpose vehicle (SPV) is set up to reduce risk perception and increase investor confidence.
This SPV takes care of regulatory requirements such as land acquisition and environmental clearances and transfers these to the winning bidder. Each project requires an investment of Rs16,000-20,000 crore.
The UMPP scheme has had its share of problems; projects at Girye in Maharashtra and Tadri in Karnataka had to be abandoned due to local resistance.
Satnam Singh, chairman and managing director at Power Finance Corp. Ltd, the nodal agency for awarding the projects, maintained that the RFQs would be issued in the current fiscal year.
“The RFQs will be issued in this financial year. If some issues come up they will be resolved as has happened in the past. There are so many agencies involved in the process and these issues are being tackled at the highest level,” Singh said.
UMPPs are critical to the Congress-led United Progressive Alliance government’s efforts to enhance the country’s power generation capacity to fuel the needs of an expanding economy. Currently, India has a power generation capacity of 150,000MW and expects to add 78,577MW by 2012.
Of 14 such UMPPs planned, the government has so far awarded four projects. Tata Power Co. Ltd has won the Mundra UMPP in Gujarat and Anil Ambani’s Reliance Power Ltd the projects at Sasan in Madhya Pradesh, Krishnapatnam in Andhra Pradesh and Tilaiya in Jharkhand.
“There is a struggle to move the concept beyond a first few projects. The challenge, which is emerging in these large projects, is that something will have to be sacrificed to get these projects moving,” said Gokul Chaudhri, partner at consultancy firm BMR Advisors.
“The country needs to take a decision about what it is willing to sacrifice in its list of priorities to get the much required power in the country. The question is how to reach that balance? An ideal situation that involves no environment cost doesn’t exist,” he added.
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First Published: Tue, Sep 29 2009. 01 15 AM IST