Highly placed officials in the power ministry said that whereas earlier, the state government was insisting on a 12 per cent free power share from the 2000 mw Talcher-II and the 4000 mw Hirma project of the US-based Southern Electric, a firm stand taken by Union power minister PR Kumaramangalam made the Orissa government backtrack.

However, no decision has been taken by the state government on the Hirma project. When contacted, Kumaramangalam confirmed the state government's move to withdraw its demand on the Talcher project. Commenting on the Hirma project, he said he had already held discussions with the state chief minister, JB Patnaik and was hopeful that a consensus would be reached soon.

The minister said the demand for 12 per cent free power from thermal power projects in the state, both in the public andprivate sector, is unfair as it would render these projects economically unviable. For the Hirma power project, Kumaramangalam said the state government was already being compensated by a 6 per cent royalty on coal along with other royalties by way of development charges.

"With 12 per cent free power to the state, the cost of power from this project will go up from the present 4 cents per KWh to 8 cents per KWh. No state will be ready to buy power at this cost", the minister added.However, if the Orissa government does not change its stance on Hirma, the Centre may change the location of the plant, it is learnt.

"We can take it to the Orissa border or somewhere else if Orissa does not withdraw its demand. But I am confident that this situation will not arise and the matter will be settled very soon", said Kumaramangalam.

Power ministry officials opine that Orissa may find it difficult to attract any future investment in the power sector if it persisted with such demands. Coming back on rails, Talcher-IIpromoted by the National Thermal Power Corporation (NTPC), will now have to strive hard for its funding, as the finance ministry has recently turned down NTPC's request to raise $ 1 billion through ECBs for part-financing this project.

NTPC had asked the World Bank for Rs 3,000 crore for this project. However, following the sanctions, there has been no progress on this front. It is learnt that the delay in financing this project has also stalled NTPC's plans to open bids for equipment contracts.