The finance ministry was previously doubtful about the maiden thermal power forays by the two hydropower generators, given the sizeable non-performing power generation assets in the country. The government is also worried about weak financial health of state power distribution companies.
The ruling Bharatiya Janata Party (BJP) is focusing on "battleground states", such as UP and Bihar, that send the most MPs to Parliament. UP accounts for 80 Lok Sabha seats and Bihar 40.
“The cabinet notes for the Buxar and Khurja projects have been moved. There were earlier reservations on these projects given the number of stranded power assets in the country. There has been a political push for these projects," said a senior government official requesting anonymity.
While SJVNL plans to build its plant at Buxar (Bihar), THDCL will construct at Khurja (Uttar Pradesh).
Non-performing assets in power generation comprise around 5.9% of the banking sector’s total outstanding advances of ₹4.73 trillion, according to the second volume of the Economic Survey 2016-17 issued in August. Of India’s installed capacity of 349 gigawatts (GW), the peak demand is only 177GW.
“Earlier the finance ministry had objections to the projects given the situation in the power sector. The PIB (public investment board) clearance has now been received, post which the CCEA (cabinet committee on economic affairs) note has been circulated," the official added.
This also comes at a time when distribution companies (discoms) have not been making timely payments to generation firms. Of the ₹36,134 crore that discoms owe to generation companies as of 31 January, UP ( ₹4,949 crore) and Bihar ( ₹206.44 crore) accounted for 19.41% at ₹7,015 crore. Also, while discoms’ financial losses narrowed from ₹51,480 crore in FY16 to ₹15,049 crore in FY18, book losses rose in FY19.
Government data showed in the first half of FY19, losses rose to ₹15,080 crore from ₹11,071 crore a year earlier.
Explaining the rationale for approving the two power projects, a second government official, who also didn’t want to be named, said “The demand for power is growing in the country and keeping that in mind it is necessary for these projects to be set up".
There has been a recent upturn in power demand due to the spread of household electrification, increased supply to agricultural consumers, low hydropower generation and extended summers. Requisitioning of additional power by discoms has also led to a short-term hike in electricity prices.
Queries emailed to the spokespersons for ministries of power, finance and SJVN on Monday evening remained unanswered.
A THDC spokesperson in an emailed response said the proposal has been under the PIB’s consideration for “quite some time," which in its meeting on 27 February recommended the investment proposal for CCEA’s approval.
“The levelised tariff of the project is Rs3.61/unit, which is very competitive and reasonable because of high grade of GCV (gross calorific value) of coal to be sourced from dedicated Amelia Coal Mine," the spokesperson said, adding the Khurja project will improve the deficit power scenario of northern India, particularly in UP which will buy 60% power from the project.
The BJP plans to leverage marquee programmes such as the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY), which helped bring electricity to India’s census villages and the Pradhan Mantri Sahaj Bijli Har Ghar Yojana, or the Saubhagya scheme, aimed at household electrification to garner votes.
Looking to reap political dividends from these states, Prime Minister Narendra Modi launched the election campaign of the National Democratic Alliance (NDA) in Patna on Sunday. He also released the first tranche of direct income transfer of ₹2,000 from Gorakhpur in UP last month, as part of the Pradhan Mantri Kisan Samman Nidhi, or PM-KISAN scheme for small and marginal farmers.
The BJP last year lost the prestigious Gorakhpur Lok Sabha seat, earlier represented by UP chief minister Yogi Adityanath. It also lost the Phulpur seat won by deputy chief minister Keshav Prasad Maurya in 2014 general elections.
The push for these projects comes at a time when the Samajwadi Party (SP) and Bahujan Samaj Party (BSP) have joined hands in UP in the upcoming Lok Sabha polls. Also, an alliance of opposition parties led by the RJD and Congress is in direct contest with the BJP-led NDA in Bihar.