Hindujas keen to revive Vizag power project

Hindujas keen to revive Vizag power project

Hyderabad: The Hinduja group, which had abandoned the setting up of a 1,040MW coal-fired power plant in Visakhapatnam, is now keen to revive the project with some changes. The group has now expressed interest in setting up a 1,200MW merchant power facility consisting of two units of 600MW each. The new project would involve investments of over Rs6,000 crore, according to a senior official in the state power ministry, who did not wish to be identified.

The original project had started off as a joint venture between the Hindujas and Edison Mission Energy. Later, the Hindujas tied up with the UK’s National Power. The project did not ever take off due to disputes regarding land, power tariff and the fuel supply agreement with Coal India Ltd.

The Vishakapatnam project was one of eight power projects to be offered counter guarantees by the Indian government in 1992. Subsequently even the counter guarantees lapsed. Though they were revived by the NDA government in 1999, the present state government 2004 scrapped the power purchase agreement (PPA) with the company in 2004, citing high cost of power.

A team consisting of Gopichand Hinduja, Ashok Hinduja and former ONGC chief Subir Raha, who is currently executive vice-chairman of the Group, last week met AP Chief Minister Y S Rakasekara Reddy and expressed interest in reviving the power project.

However, a state power ministry official said the government would like to clarify certain issues in the deal before clearing the project. The Hindujas want reallocation of about 1,200 acres of land, originally alloted to them in 1994, at the old price of Rs2 lakh an acre. “The current market price is close to Rs1 crore per acre and we are not ready to accept a price less than Rs20 lakh an acre," the official added.

Also, since this is a merchant power project, it is under obligation to sell only a quarter of the power produced at a pre-determined price. The state government now wants this to be increased. "We want at least 50% of the power produced at this facility to be sold to the state at price on par with that of NTPC Simhadri — at Rs1.80 a unit — while they are willing to sell only 25% power at that price."

The next round of negotiations to resolve this issue is set to take place shortly. When contacted, Prabal Banerjee, the Hinduja Group CFO, confirmed that efforts were on to revive the power project and that the group was working out revised details.

The move by Hindujas to revive the project comes close on the heels of its announcing plans for a light commercial vehicle (LCV) facility in Andhra Pradesh with an investment of Rs3,000 crore. The $2-billion Ashok Leyland, the flagship of Hinduja Group, is a leading manufacturer of commercial vehicles in India with six manufacturing locations at Chennai, Hosur and Alwar and Bhandara that have a total capacity of 84,000 units.

"The Hinduja Group has proposed to invest Rs1,500 crore in the first phase of the LCV project of Ashok Leyland along with Nissan Motor Co. Ltd. the plant will have a capacity to produce 120,000 units. The capacity would be doubled in the second phase with another Rs1,500 crore of investment, according to the preliminary estimates," the State Industries Department Principal Secretary, Sam Bob told Mint.