The government has proposed yet another imported coal-based ultra mega power project (UMPP) in Gujarat, even though the fate of the country’s first such project in the state ? being developed by Tata Power ? hangs in the balance because of severe financial problems that have forced the company to seek a rescue package from the regulator.
Sources privy to the development told FE that the Central Electricity Authority (CEA) has finalised and recommended the site at Lodhva village in Junagarh district for the proposed 4000 MW power plant. The state government had earlier offered four sites, including locations around Jamnagar, Kutch and Porbandar districts, for the UMPP. But the CEA has favoured Lodhva as the location is most convenient for importing coal for the UMPP. Proximity to the sea will also help in getting water for coal-washing.
?We have recommended the site at Lodhva but its finalisation has been pending for want of certain details, including clearance from the department of mines/geology. We have asked the energy and petrochemical department of the state government to expedite (matters) to finalise the site so that bids could be invited for the UMPP,? said an official of the CEA who did not want to identified.
But the second project in Gujarat still has to overcome a few problems. The site contains limestone deposits and 70% of the area falls under the ?Gauchar? category or pastoral land where divestment of land is very difficult and complex.
The proposal for another UMPP in Gujarat comes at a time when Tata Power’s Mundra project is facing acute financial problems even though the company this month synchronised the fifth and last unit of 800 MW, making the 4000 MW project fully operational.
Coastal Gujarat Power (CGPL), the special purpose vehicle of Tata Power that has won the bid for Mundra UMPP, has tied up 3.28 million tonne of coal supply from Indonesia at a discount but its calculations on fuel costs went haywire because of the changes in Indonesian regulations on coal pricing. This has increased coal price by $40 a tonne for the project, upsetting the fuel costs worked out by the company at the time of the bidding. The company is producing power at a loss now and has sought intervention of the Central Electricity Regulatory Commission to allow it to raise electricity tariff in line with the increase in its fuel cost.
?Other projects should not face such problems. The government is revising standard bidding document (SBD) for tariff-based projects, allowing increased cost of fuel as pass through in tariff. Once this happens, global shocks could be easily absorbed through increase in tariff,? said a power ministry official.
Tata Power won the Mundra project in 2006 by quoting 55% of the fuel cost as a non-escalable component and a levelised tariff of R2.26 per unit. Currently, in tariff-based projects increase in fuel cost is not passed in tariff.
Apart from an investment friendly SBD, global changes have also come in favour of projects based on imported coal. Due to sluggish demand globally, the gap between price of domestic and imported coal has narrowed down. Internationally, the price of high grade coal in the rage of 5,000 to 7,000 Kcal has declined from $120 a tonne in January 2012 to $ 85 a tonne now.
Power Finance Corporation (PFC) is the nodal agency for the purpose of development of UMPPs through Special Purpose Vehicles (SPVs). Out of 16 UMPPs identified so far (March 2012), PFC floated 12 SPVs as its wholly-owned subsidiaries for development of UMPPs.
SPVs invited bids for six UMPPs during March 2006 to March 2012 and awarded four UMPPs, viz. Sasan in Madhya Pradesh, Mundra in Gujarat, Krishnapatnam in Andhra Pradesh, and Tilaiya in Jharkhand to the identified developers.