R-Power wants to scrap Raigad power project

R-Power wants to scrap Raigad power project

Mumbai:Anil Ambani-controlled Reliance Power Ltd (R-Power) wants to scrap a proposed 4,000 megawatts (MW) power project at Shahpur in Maharashtra’s Raigad district because of the state government’s inability to complete land acquisition within the legally stipulated time frame, further jeopardizing India’s plan to generate the electricity it badly needs to feed an economy growing at close to 8%.

The state government issued a notification to acquire 2,700 acres of land in Shahpur and six adjoining villages in November 2007. The process had to be completed in three years under the state’s land acquisition law, which it hasn’t done.

Power-starved India needs to bolster its generating capacity to maintain and speed up a growth rate that’s constrained by inadequate infrastructure, including electricity, roads and ports. India wants to add a power generation capacity of 62,374MW by 2012 to its existing 180,000MW. The country plans to add 100,000MW under the 12th Plan period beginning April 2012. Fuel price revisions and environmental concerns have rendered uncertain parts of this strategy.

R-Power sent a letter to district collector H.K. Jawale on 3 September, saying it wouldn’t be able to pursue the project in view of the government’s failure to meet the land acquisition deadline. It also demanded the return of 45 crore that had been deposited with the state government to start the land acquisition process. This actually comes after Jawale recommended that the land acquisition be scrapped as the company didn’t seem to be interested in the project.

According to the Raigad district collector’s letter to the state revenue secretary on 3 August, R-Power executives had promised in May 2010 a written undertaking within 15 days offering a rehabilitation and resettlement package for the displaced villagers. But no such undertaking was provided by R-Power, despite a reminder in June this year, Jawale said.

The “memorandum of understanding signed with the state government in 2005...expired in 2009", an R-Power spokesperson said. “Further, the timelines to be met for the land acquisition process...have also expired. In view of these developments, the company has requested the state government to refund the deposits made so far (for) the acquisition of land."

Tata Power Co. Ltd, meanwhile, is going ahead with its plan to implement a 1,600MW power project in the vicinity.

R-Power is also developing another project in Maharashtra—a 600MW project at Butibori, which the company started developing in 2009; the first phase of 300MW is expected to begin operations in March 2012.

R-Power plans to develop 39,993MW of power based on coal and gas through 12 projects across India, according to the company’s website.

However, its 7,480MW gas-based Dadri project in Uttar Pradesh has failed to get under way because of the non-availability of gas from Reliance Industries Ltd’s Krishna-Godavari basin well. Besides this, the Allahabad high court has struck down the project’s land acquisition process.

The company has also stopped work on the 4,000MW Krishnapatanam ultra mega power project (UMPP) following an increase in international coal prices. That makes Shahpur the third R-Power project facing an uncertain future.

“A decision will be taken on the issue very soon," said Maharashtra revenue minister Balasaheb Thorat, who confirmed receiving the Raigad collector’s letter.

The Raigad villagers have already challenged the land acquisition proceedings in the Bombay high court, which earlier this week directed the state government to file an affidavit clarifying its position on the issue within three weeks.

“Both Reliance and the government are trying to pass the blame on to each other," said Anil Patil, secretary of the Shetkari Sangharsh Samiti. “But if the project is scrapped, the credit must go to the local farmers who opposed it tooth and nail."

The Shahpur project, being developed by R-Power’s subsidiary, Maharashtra Energy Generation Ltd, has two parts— 1,200MW will be based on imported coal, and the rest on gas.

R-Power had planned to source coal for its project from its mine in Indonesia. But fuel produced in that country is set to become more expensive as Indonesia recently pegged prices to prevailing international rates.

India’s power programme needs a review, an analyst said.

“A strategy rethink is valid and understandable for the merchant plants (as) there is a mismatch today between local power tariffs and the overseas coal prices," said Kameswara Rao, leader of the energy, utilities and mining practice at consultant PricewaterhouseCoopers Pvt. Ltd. “The regulated plants have pass-through provisions and, hence, should be able to pass on higher costs to buyers."

Shahpur’s prospects have dimmed as JSW Energy Ltd has put expansion plans at its Jaigad power plant in Maharashtra’s Ratnagiri district on hold. The company had planned to raise capacity of the 1,200MW plant to 3,200MW. Maharashtra, among India’s most highly industrialized states, is seeking to make itself an attractive investment destination for manufacturers to maintain its primacy in the sector.

Elsewhere in India, Gujarat has opposed any tariff hike for the Mundra UMPP project being developed by Tata Power, as Mint reported on 5 September. Mint reported on JSW’s plans to stall the Jaigad expansion on 22 July.

The UMPP programme involves the setting up of 16 such plants to meet the needs of the world’s second fastest growing major economy after China. Of these, four have been awarded.

R-Power has sued HT Media Ltd, publisher of Mint, in the Bombay high court over a 12 May 2010 front-page story in Mint that it disputed. HT Media is contesting the case.