Tamil Nadu to double capacity, become South India’s power hub

Tamil Nadu to double capacity, become South India’s power hub

Chennai: Sensing an opportunity in the country’s power scarcity, the Tamil Nadu government is proposing to add 22,000MW, which is more than double the existing power generation capacity in the state. It plans to do this through private sector investments under the window of merchant power plants (MPP), wherein these units will be free to sell the power within and outside the state.

The government also plans to invest Rs25,000 crore over the next three years for overhaul as well as expansion of transmission and distribution capacity in the state.

“We plan to make Tamil Nadu the power hub of this part (of India). The surplus (power) generated in the state will be sold to the northern states," Arcot N. Veeraswamy, the state energy minister, said.

The concept of MPPs arose after the Electricity Act, 2003, gave buyers the option of procuring power from anywhere in the country. Such projects, with an installed capacity of up to 1,000MW, can sell electricity directly to large users, without entering into long-term power purchase agreements.

The Tamil Nadu government plans to act as a facilitator in setting up MPPs by helping the promoters secure land and obtain environmental clearance and other approvals.

At present, Tamil Nadu has an installed power generation capacity of 10,000MW and plans to raise this to 13,000MW by 2012. The state expects its power demand in 2007-08 to be around 9,500MW, a 12% increase over the current demand levels. It has the largest wind power capacity in the country, meeting one-fifth of the state’s demand.

While welcoming the state’s move on MPPs, some analysts were cautious.

“Tamil Nadu has one of the better power utilities in the country and the state has very low losses. Though the state’s MPP plans are very good, such projects are long-term and require huge capital investments. In the absence of long-term power purchase agreements, it remains to be seen where the developers raise the finance from. It looks too optimistic at this stage," said K. Ramanathan, distinguished fellow at The Energy Research Institute.

The state has already emerged as an important location for the government’s ultra mega power project initiative, with two of the 4,000MW projects proposed to be set up at Cheyyur in Kancheepuram district and Marakkanam in Viluppuram district.

Though the state’s electricity board has among the best operations among all the state boards in the country, characterized by low transformer breakdown rates and good collection efficiency, a report on the performance of the power sector by rating firms Crisil and Icra says that the free power supplied to the agricultural consumers has put a burden on Tamil Nadu’s finances. The subsidy bill for 2005-06 was around Rs1,166 crore.