Power sector needs $300-bn funding

Written by Sanjay Jog | Updated: Nov 10 2009, 07:04am hrs
Undeterred by the country missing the capacity addition target of 78,700 mw by the end of the 11th Plan, the power ministry hopes that the upturn in the economy, the revision in the mega project policy and new JVs for power equipment manufacturing are encouraging factors. In an exclusive interview with FEs Sanjay Jog, power minister Sushilkumar Shinde admitted that a total capacity of 62,374 mw is likely. Also, a capacity of 12,590 mw may see the light of day in the 11th Plan, with the remaining capacity spilling to the 12th Plan period. He also noted that a major feature of the revised mega project power policy is that its benefits will be extended to supercritical projects, to be awarded through ICB, with the mandatory condition of setting up an indigenous manufacturing facility if they meet the eligibility criteria. Excerpts:

What is the present capacity addition being pursued in the 11th Plan

An ambitious target of 78,700 mw has been fixed for the 11th Five Year Plan, comprising 59,693 mw of thermal (76%), 15,627 mw of hydro (20%) and 3,380 mw of nuclear power (4%). So far, projects with a capacity of 18,235 mw have already been commissioned and 62,375mw are under various stages of construction.

It seems that the country will yet again miss its capacity addition target. What are your views

As per the latest assessment by the Central Electricity Authority, a capacity aggregating 44,129 mw is likely to be commissioned during the remaining period of the 11th Plan. Thus, a total capacity of 62,374 mw is very likely. Further, a capacity of 12,590 mw may materialise, owing to effort put in during the 11th Plan. The remaining capacity may slip into the 12th Plan. However, this does not include about 12,000 mw of capacity expected from captive power projects by the end of 2011-12. Slippages are largely due to constraints in the procurement of plants and equipments and delays in forest and environment clearances. With four new joint ventures in equipment manufacturing in the next five years, excluding the existing Bhel JV, the total manufacturing capacity was expected to rise to over 25,000 mw per year. An investment of $300 billion is required and investors are quite keen to invest in this sector.

What is the status of the implementation of ultra mega power projects (UMPPs)

So far, three UMPPs at Sasan, Mundra, Krishnapatnam and Tilaiya of 4,000 mw capacity each, have already been awarded to successful bidders. In addition, special purpose vehicles (SPVs) have been established for similar UMPPs in Chhatisgarh, Karnataka, Maharashtra, Tamil Nadu and Orissa.

There has been little progress in tapping the hydro potential in the country. What are the steps taken by the government to give a boost to this

The government has already notified the hydro power policy, which provides a level playing field to private developers. It envisages transparent selection criteria for awarding sites to private developers and enables the developer to recover his additional costs through merchant sales up to a maximum of 40% of the saleable energy. For 10 years from the date of commissioning, the developer has to provide 100 units of electricity per month to each project-affected family, in cash or in kind or a combination of both. According to the revised mega power projects policy, the threshold capacity for hydro power plants located in Jammu & Kashmir, Sikkim and the seven states of the North East for availing mega benefits has been reduced from 500 mw to 350 mw. As far as hydro power capacity addition in the 12th Plan is concerned, in all, a total of 109 projects with a capacity of 30,920 mw, have been identified.

What are the key features of the revised mega power projects policy

Benefits will be extended to supercritical projects, to be awarded through international competitive bidding (ICB), with the mandatory condition of setting up indigenous manufacturing facility if they meet the eligibility criteria. The undertaking of ICB by the developers for the procurement of equipment for mega power projects will not be mandatory, if the requisite of power has been tied up through tariff-based competitive bidding or if the project has been awarded through tariff-based competitive bidding. A basic custom duty of only 2.5% will be applicable on brown field expansion of existing mega projects. Mega power projects will be required to tie up power supply to the distribution companies/utilities through long-term power purchase agreements and may also sell power outside long-term PPAs, in accordance with the National Electricity Policy 2005 and Tariff Policy 2006.

How is the government addressing the high level of aggregate transmission and commercial losses (AT & C)

The Restructured Accelerated Power Development and Reform Programme (APDRP) focuses on actual, demonstrable performance in terms of AT & C loss reduction. The size of the programme is Rs 51,577 crore. The expected investment for part A (baseline system) will be Rs 10,000 crore and for part B (regular distribution strengthening projects) Rs 40,000 crore. PFC is the nodal agency for operationalising the programme. Funds for projects under both the parts will initially be provided through loans. The loan for projects under part A will be converted into a grant on the completion of the project. Up to 50% of the loan for part B will be converted into a grant on 15% AT&C loss in the project area on a substainable basis.