Govt to axe four ultra mega power projects

Govt to axe four ultra mega power projects

In a setback to its plans to add power generation capa-city in one of the world’s fastest growing large economies, the Indian government is poised to axe four of its nine showpiece power projects after they faced several roadblocks.

Each of the so-called ultra mega power project is to generate 4,000MW of power and requires Rs16,000-Rs20,000 crore investments. They were an attempt by the government to increase power generation capacity and attract private firms to the business in a nation where regulations and market conditions have traditionally hindered both.

“After the projects at Sasan (Madhya Pradesh) and Mundra (Gujarat), only (those at) Tilaiya (Jharkhand), Krishnapattnam (Andhra Pradesh) and Jharsuguda (Orissa) will be bid out by the Power Finance Corp. This is due to the problems that the remaining projects have faced," said a senior government official involved with the ultra mega power project process, who did not wish to be identified. This means that the projects at Girye (Maharashtra), Tadri (Karnataka), Akaltara (Chhattisgarh) and Cheyyur (Tamil Nadu) are off.

The reasons for the projects being dropped vary. In the case of the Cheyyur project, it is because the state government is not keen on the site—it wants the plant to be located at Nagapattinam. The projects at Tadri and Girye face environmental hurdles. And the Akaltara project is being shelved because the state government wants 12% of the power generated by this plant to be given to it free of cost.

The Union government had initially planned ultra mega power projects in five locations—Sasan, Mundra, Girye, Tadri and Akaltara—but later decided to add four more at Krishnapattnam, Tilaiya, Cheyyur, and Jharsuguda. The ultra mega power project plan was conceived in January 2006.

The decision to shelve four projects means the planned capacity addition of 36,000MW will come down by 45% to 20,000MW. Of the others, the government has awarded the Mundra project to Tata Power Co. and the Sasan one to Reliance Energy Ltd. A consortium of Lanco Infratech Ltd and Globeleq had initially won this project, but its bid was disqualified recently because of a change in the constitution of the winning consortium.

The government could have tried to keep one more project going, according to R.V. Shahi, the former power secretary and the person who conceptualized the ultra mega power project scheme. “Apart from Krishnapattnam, Tilaiya and Jharsuguda, one more coastal project, either in Maharashtra or Karnataka, should have been possible to bid out by the end of this year," he said.

However, analysts who track the sector say that even partial success of the scheme would be “a huge achievement."

The decision to shelve projects would “send a strong signal" to states that were making “unusual demands for free power" from the ultra mega power projects, said Pradeepkumar Dhamdhere, an analyst with ASK Securities India Pvt. Ltd. He added that the cancellation “could mean a minor negative sentiment for power equipment manufacturers and NTPC, but only for a short while." He added that 16,000MW (the amount of power that would have been generated by the four shelved projects) is a fraction of the 156,000 MW of power generation capacity the country plans to add between 2012 and 2017.

India currently has a power generation capacity of 128,182MW and plans to add another 78,000MW by 2012.