Reliance Power exits, but govt moves ahead, mulls UMPPs at site of older plants

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New Delhi | Updated: April 29, 2015 12:42 PM

Reliance Power’s move to terminate PPP for the proposed UMPP at Tilaiya in Jharkhand dealt blow to the government’s UMPP plans.

power plantsAt least a dozen coal-fired units aged 25 years and more have enough land at their disposal to house UMPPs that typically have a capacity of 4,000 MW. (Reuters)

Even as Reliance Power’s move to terminate the power purchase agreement (PPP) for the proposed ultra mega power project (UMPP) at Tilaiya in Jharkhand dealt yet another blow to the government’s already-undermined UMPP plans, the Union power ministry is considering setting up a clutch of these units at the sites of old coal-based power plants that have almost run their course but are in possession of surplus land.

The rationale behind the move is that the intractable issue of inordinate delays in land acquisition for the proposed UMPPs could be addressed in a pragmatic way by setting up these mega power stations where old power units are located. That in most of these cases water, environmental and land-related clearances are already in place would make matters easier for potential developers of UMPPs, a ministry official said, adding that the exact sites for these projects were yet to be identified.

FE has learnt that at least a dozen coal-fired units aged 25 years and more have enough land at their disposal to house UMPPs that typically have a capacity of 4,000 MW.

power plants

“Older plants were built on excess land way back in the 1980s. So the land around such plants are compatible for installing UMPPs,” the ministry official told FE on the condition of anonymity. He added that a feasibility study on the “replaceable plants” could be conducted in conjunction with the state governments concerned to determine the terms of negotiations (for UMPP bidding).

Under the prevailing circumstances, the industry experts say that the unorthodox idea (of setting up UMPPs on old plant locations) could work for UMPPS.

“We have suggested a similar solution to the ministry of power and so fully support the proposal. Implementation of the idea may require negotiations with the state governments who own most of the old plants but it is evidently very workable,” said Ashok Khurana, director general, Association of Power Producers. He added that states could be compensated from the Centre’s quota of unallocated power for the dip in generation while the older plants are dismantled.

The plan could, however, encounter resistance from some states which might demand unreasonable share in the production, an experts told FE.

Khurana added that all old plants are not close to mines, one of the requirements for a UMPP, but arrangement for linkages can be made with support of the state governments. UMPPs are awarded based on tariff-based competitive bidding but the government ensures that the winner gets land and other clearances, thereby reducing the risks for the operators. But, practically, the government’s inability to acquire land in some cases has forced it to formulate the proposed unconventional framework for getting its ambitious UMPP project gain ground.

The government’s policy on UMPPs has come a cropper with only two of the original four UMPPs awarded between 2007-09 functional. While RPower has scrapped the PPA for the Rs 36,000-crore Tilaiya UMPP citing undue delays in land acquisition (only 20% of the required land was handed over to the company), according to the Central Electricity Authority (CEA), it “stopped construction” at the site of the Krishnapatnam UMPP, peeved at the unforeseen spike in Indonesian coal price. Power Finance Corporation, the nodal agency in charge of bidding for UMPPs, had to scrap the process for two projects last year due to lukewarm response from private developers.

Meanwhile, reacting to RPower ‘s move on the Tilaiya plant on Tuesday, a government source said that specific time-bound commitments were made to the operator by the state government on land acquisition in April after a meeting between CEA officials and state government.

It is pertinent to mention that the developer has filed a petition with Central Electricity Regulatory Commission for tariff revision, the source added.

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