FM to chair meeting on Feb 1 ten major projects stalled on fuel cost issues to be discussed
With lending to some of the many stalled power projects becoming a major concern for financial institutions, the Union government has decided to review 10 major ones, involving an investment of Rs 32,301 crore, on the coming Wednesday.
These projects have Rs 17,764 crore worth of loan sanctions from public sector banks alone, of which a substantial chunk has been disbursed.
In all, Rs 1,16,000 crore have been invested in projects that have a total generation capacity of 21,160 Mw. Most of these are either ready for commissioning or are expected to be in a few months, said officials. The projects include Tata Power’s 4,000 Mw ultra mega power project and Adani Power’s 4,620 Mw project at Mundra in Gujarat. While the first unit of the Tata project is ready for commissioning, 3,300 Mw of the Adani project has already been commissioned and the remaining 1,320 Mw is expected to be commissioned in two months. Both the projects are unable to generate because of the increased cost of Indonesian coal, which cannot be passed on in power supply rates under the present norms.
The department of financial services, that has convened the meeting, feels the disbursed amounts would turn into non-performing assets (NPAs) in certain cases if the uncertainty surrounding these 10 projects and another 25 infrastructure projects, including those in the steel and iron sector, reviewed earlier, were not removed. These 25 projects involve investment of Rs 1,50,415 crore.
The Wednesday meeting comes within a month of high-level interactions between the government and the power industry. It would be chaired by finance minister Pranab Mukherjee and attended by other ministers concerned. For the 10 projects, the meeting would especially address the issue of uncertainty of coal supply, said an official.
In the run-up, the finance ministry has asked the power ministry to take policy decisions to mitigate problems relating to coal, to prevent slippages of projects into the NPA category, besides aggravating the deficit in power generation. Its contention is based on the fact that any increase in coal cost cannot be passed on in power rates in the 10 projects, since they were given out on rate-based bidding. It is estimated that the deficit in coal supply has increased fuel cost by around Rs 0.7 to Rs 1 a unit, depending on factors such as technology and location.
Besides the Adani and Tata projects at Mundra, based on imported coal, other projects expected to figure in the discussions are the 3,300 Mw Tiroda plant in Maharashtra and the 1,320 Mw Kawai project in Rajasthan, both of Adani Power; three projects of Essar, in Madhya Pradesh, Gujarat and Jharkhand, involving 4800 Mw; and JSW’s 1,200 Mw Ratnagiri, India Bulls’ 1,320 Mw Amravati and GMR’s 600 Mw Waroa plants in Maharashtra.
The power sector has become a big area of concern for the government. On January 18, chief executives and chairmen of power companies camped in Delhi, holding meetings with Prime Minister Manmohan Singh and key ministers. Singh decided to form a committee of secretaries under his principal secretary, Pulok Chatterjee, to resolve issues in the sector
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