Plan for UMPPs in 3 states gathers speed

Govt checks out sites in Gujarat, Tamil Nadu, Jharkhand after two 4,000MW coal projects fail to get clearance

The failure to award 4,000MW coal-based power projects in Bedabahal in Orissa, and Surguja in Chhattisgarh, has forced the Indian government to hasten the process of locating similar large-capacity plants in states such as Gujarat, Tamil Nadu and Jharkhand.

Gujarat and Jharkhand each already have one so-called ultra-mega power project (UMPP) under way at Mundra and Tilaiya, respectively.

While sites such as Kutch, Junagarh and Dwarka are being evaluated for finalization in Gujarat, sites at Deograh and Tenughat in Jharkhand are being considered, according to documents reviewed by Mint.

A site at Nagapattinam is being considered in Tamil Nadu. The government also plans to invite bids for a 4,000MW coal based power project at Cheyyur in the southern state.

“All depends upon how much information the states provide, and the pace of providing such information,” said Satnam Singh, chairman and managing director of Power Finance Corp. Ltd (PFC), the nodal agency responsible for awarding the projects.

The UMPP scheme has been weighed down by ecological concerns and local resistance. The environment ministry is considering conditional approval for the mining of coal to fuel the Orissa UMPP.

But it has also made approval conditional on the shelving of the state-run NTPC Ltd coal block at Dulanga and an Orissa government power project, neither of which appears possible, according to government officials.

In June, the coal and environment ministries announced the concept of go and no-go areas for coal mining to protect the country’s best forests.

But this raised concerns that such a policy would hamper efforts to meet the growing demand for fuel in an energy-short economy.

Failure to get environmental clearances has forced the PFC to extend deadlines for firms to respond to requests for qualification (RFQs) for the two projects in Orissa and Chhattisgarh.

“Gujarat has been a preferred investment destination, and the state will require power due to the industrial plans announced recently. Setting up a project in Jharkhand will help in utilizing the coal deposits there,” said Rupesh Sankhe, an equity research analyst at Angel Broking Ltd. “Given the current scenario, the state governments’ support is important to set up such a project.”

The Central government is hopeful that after its efforts to restart the bid process for projects in Orissa and Chhattisgarh failed, states such as Gujarat and Jharkhand will help it expedite the award process.

UMPPs follow competitive tariff-based bidding, in which special purpose vehicles (SPVs) are set up to reduce risk perception and increase investor confidence.

These SPVs take care of regulatory requirements such as land acquisition and environmental clearances, and transfer these to the winning bidder.Each project needs investment of around Rs.20,000 crore.

The government wants to set up 16 UMPPs, or power projects that produce at least 4,000MW each, to meet the needs of the world’s fastest growing major economy after China. India has a power generation capacity of 170,000MW and expects to add 62,374MW by 2012.