Capacity addition hits roadblock as states seek 5% of developers profit

Written by Sanjay Jog | Mumbai | Updated: Jun 26 2009, 06:44am hrs
The power ministrys move to expedite the capacity addition of 78,700 mw in 11th Plan and also promote ultra mega power projects (UMPPs) has hit a major roadblock as states are pressing for at least 5% from the profit earned by project developers for peripheral development fund. Orissa is the first state which has declared that 5% profit contribution should come from UMPP developers as well as from NTPC, other central public sector undertakings such as Neyveli Lignite Corporation (NLC) and independent power producers (IPPs) for peripheral development fund . The ministry fears that if similar condition are laid down by other states the investment in the power sector will be adversely hampered. Besides, the ministry claims that it will have an adverse impact on electricity tariffs.

Power ministry sources told FE on Wednesday, The main objective of development of UMPPs is to obtain the lowest possible electricity tariff through competitive bidding and the measures such as one proposed by Orissa would run counter to the overall UMPP initiative. Recently, the power ministry has also offered 50% power to host states for UMPPs which in itself will be a big boost to the economy of the respective host states.

Power minister Sushilkumar Shinde in the recent communication has called upon the Orissa chief minister Navin Patnaik to intervene for the withdrawal of a condition to contribute 5% from the profit for peripheral development fund. Shinde has said that the Orissa government can insist on implementation of the national relief and rehabilitation policy and not go beyond it. However, sources said so far the Orissa government has not withdrawn its condition.

So far Sasan, Mundra, Krishnapatnam and Tilaiya UMPPs have already been awarded while the ministry has proposed to promote UMPPs in Orissa, Chhatisgarh, Tamil Nadu, Maharashtra and Karnataka. Besides, NTPC is planning a 4,000 mw of project in Orissa which is coal rich state.