Tamil Nadu govt eyes Cuddalore site as Cheyyur too costly

Tamil Nadu govt eyes Cuddalore site as Cheyyur too costly

Padappai, Chennai: In what may further delay the Tamil Nadu government’s ultra mega power project (UMPP) plans, the state government has decided to shift the 4,000MW project based on imported coal from Cheyyur to Cuddalore.

“The Cheyyur project is not happening due to very high land prices there. That is the reason why we are now looking at Cuddalore," said state electricity minister Arcot Veera-swamy.

To reduce risk perception and increase investor confidence, the UMPP policy entails the creation of special purpose vehicles (SPVs), which works with the state government on land acquisition and civic body and environmental clearances. Eventually, these shell companies get transferred to the successful bidder.

A senior state government official, who asked not to be named, said, “As compared to around Rs30 lakh to Rs40 lakh per acre at Cheyyur, we can get land at Cuddalore at the rate of Rs4 lakh to Rs5 lakh per acre." A UMPP like the one proposed at Cheyyur requires around 2,500 acres of land.

However, a senior Union government official, who did not wish to be identified did not agree and said, “I fail to understand why the Tamil Nadu government has a problem with high land prices if it is for the developer to pay. The Cheyyur project issue has been hanging fire for a long time. It has now been close to a year."

Tamil Nadu has an installed power generation capacity of 10,000MW and plans to raise this to 13,000MW by 2012.

Veeraswamy also maintained that the state government was looking at the option of setting up another UMPP at Marakkanam.

This challenges the claims reported in Mint on 8 October of NTPC Ltd, the country’s largest power generation company, which had maintained that the sites at Cheyyur and Marakkanam under consideration for UMPPs had already been reserved for it. It had, in a letter written to the power ministry, requested that the Cheyyur project site be retained with NTPC.

A senior NTPC executive, who did not wish to be identified, said, “We will have to find out whether the prices are actually so high. Once we find out, only than we can have a decision on the project."

“There are two ways of looking at this issue. The state government may be right as a higher land cost will result in a higher tariff that will have to be borne by the consumer. On the other hand, any further delay will add to the problem of low growth in the power generation capacity addition in the country," said Hitul Gutka, an analyst at Mumbai-based India Infoline Ltd.

UMPPs have had their fair share of problems. Of the nine proposed projects, only six are on track. While the projects at Mundra in Gujarat and Sasan in Madhya Pradesh have been awarded to Tata Power Co. Ltd and Reliance Power Ltd, respectively, the ones at Tilaiya in Jharkhand, Krishnapattnam in Andhra Pradesh, Cheyyur or Marakkanam in Tamil Nadu, and Jharsuguda in Orissa are expected to be awarded in due course.

The Centre 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 government.