India plans to set up seven more power projects that have a generation capacity of 4,000MW at a cost of Rs20,000 crore each, taking the total number of such projects in the country to 16.
The new so-called ultra mega power projects (UMPPs) will be located in Andhra Pradesh, Tamil Nadu, Gujarat, Orissa and Jharkhand, states where similar projects are already planned after their governments were quick to grant clearances to the nodal agency, Power Finance Corp. Ltd (PFC) for the first lot of projects.
"While both Andhra Pradesh and Orissa are to get two UMPPs each, states such as Tamil Nadu, Gujarat and Jharkhand are to get one additional project each," said Satnam Singh, chairman and managing director, PFC.
States where these projects are set up are allowed to use a substantial part of the electricity generated. Large power projects are crucial to India's efforts to boost generation capacity to meet demand for power in the world's second fastest growing major economy. India has a power generation capacity of 161,000MW and expects to add 62,000MW by 2012.
Nine UMPPs were originally planned and thus far, projects at Mundra in Gujarat, Sasan in Madhya Pradesh, Krishnapatnam in Andhra Pradesh and Tilaiya in Jharkhand have been awarded.
PFC had extended the deadline for the submission of request for qualification (RFQ) for a project at Sarguja in Chhattisgarh by two months to 5 July. It has also invited RFQs for the Bedabahal project in Orissa, for which the submission deadline is 30 July.
"The idea is good. However, how many of these will materialize remains to be seen," said an analyst at a Mumbai brokerage, requesting anonymity. "The other problem that the developers will face is funding."
UMPPs follow a competitive tariff-based bidding process in which a special purpose vehicle (SPV) is set up to reduce risk perceptions and increase investor confidence. The SPV takes care of regulatory requirements such as land acquisition and environmental clearances and transfers these to the winning bidder.
"The SPVs for all the new UMPPs have been formed," said Singh. PFC expects several firms, including international ones, to bid for the projects.
The scrapping of a non-compete agreement between the Ambani brothers in May has created room for Mukesh Ambani-led Reliance Industries Ltd (RIL) to invest in the sector. "The power sector is a logical extension for us and we will bid for all the UMPPs. In the next few months, we will have a concrete investment programme," the RIL chairman had said at the firm's annual general meeting in June.Younger brother Anil Ambani's Reliance Power Ltd has already won the rights to develop three UMPPs.
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