Fund gap trips power producers plans

Written by Sanjay Jog | Mumbai | Updated: Nov 29 2009, 03:15am hrs
A large number of independent power producers (IPPs) plans to set up thermal and hydro power projects in resource-rich states like Orissa, Jharkhand, Chhattisgarh, Arunachal Pradesh and Sikkim are in jeopardy. This is due to roadblocks in terms of fund crunch and the lack of power purchase agreements.

IPPs have made some progress by acquiring land, getting water allocation and fuel linkages. Many of these projects, however, have not been able to get financial closure or obtain disbursement of funds from financial institutions primarily because they do not have power purchase agreements with states or utilities.

Difficulties are also being experienced by these IPPs in obtaining long-term open access for transmission of power from these projects to the beneficiary states. Consequently, actual progress is suffering, said a source from the power ministry. The issue was discussed at length with various states at a meeting convened by the ministry on November 15.

Moreover, many states, which are not in a position to set up their own generation capacity, have the option to call bids for procurement of power on Case I bidding (tariff-based bidding without specifying the fuel or the location of the plant).

This will help financing of the IPP project and also assist in the development of the necessary transmission systems for evacuation of power from these projects, the source added.

Bids for power procurement can be for any tenure of supply of power. Gujarat, Maharashtra and Haryana have already finalised contracts for procurement of power under Case I bidding. On the other hand, Rajasthan and Uttar Pradesh have invited bids for procurement of power. The Centre has already issued standard bidding document for Case I bidding.

During 10th Plan period target of adding a total capacity of 21,180.2 mega watt, a paltry 1,930.6 mw came from the private sector. In the 11th Plan, the private sector is expected to add 15,043 mw of the proposed total capacity of 78,700 mw.