Dealing another blow to the government’s 2005 initiative of developing ultra mega power projects (UMPPs), Reliance Power has transferred its entire stake in the 3,960 MW Tilaiya power plant to the state-run Jharkhand Urja Vikas Nigam for Rs 112.6 crore. According to sources, the company, which was awarded the project in 2009, would also get back bank guarantees of Rs 600 crore.
Construction of the project, which was scheduled to begin commercial operations in 2015, has not started yet due to issues related to land acquisition and transfer by the Jharkhand government. The state’s energy department has accepted the termination of power purchase agreement (PPA) for the Tilaiya plant. Reliance Power had earlier said the PPA termination would reduce the Anil Ambani-led company’s capex pipeline by Rs 36,000 crore.
Among 10 states which agreed to buy power from the Tilaiya plant, Jharkhand was supposed to procure the maximum amount of electricity (25%) generated, followed by Uttar Pradesh, Bihar and Punjab at a levelised tariff of Rs 1.77/unit. The average cost of thermal power in the country is Rs 3.53/unit.
Of the nine UMPPs initially proposed, only four have been awarded yet, and only two — Mundra, run by Tata Power, and Sasan, run by Reliance Power — are operating right now. Tata’s Mundra plant, which runs on imported coal, is losing 93 paisa for every unit of electricity it generates after the Supreme Court ruled in April 2017 that rise in cost of imported coal cannot be passed on to procurers through higher tariff.
The other two UMPPs, Krishnapatnam in Andhra Pradesh and Tilaiya, were awarded to Reliance Power. Though some elementary construction work had started at the Krishnapatnam plant, which was to run on imported coal, the company stopped the construction work in 2011 following rise in cost of Indonesian coal.
Experts have pointed out that setting up of new UMPPs does not seem feasible at a time when about 40,000 MW of power plants are without PPAs, half of which are already installed. Lack of PPAs casts doubts on the ability of power plants to repay debts on time, increasing the portfolio of stressed assets.