RPower, Govt Lock Horns Over Rs 36K-Cr Tilaiya UMPP

Co says its decision to pull out of the project is due to delay in acquiring land, while govt disagrees saying it had given time-bound commitments barely 10 days before co’s decision
Reliance Power (RPower) and the government have taken conflicting positions over the company’s decision to pull out of the `. 36,000-crore Talaiya ultra mega power project (UMPP), citing inordinate delays in land acquisition for the project.Government officials strongly disagreed and said the Jharkhand government had given time-bound commitments on land acquisition barely 10 days before the “unilateral“ decision of the Anil Ambanipromoted company. Official sources said the 10 states that would have bought the power from the proposed plant would take necessary action against the company, which had also filed a petition with the regulator for raising the tariff.RPower said there had been 25 review meetings but there was no progress on the ground.

The company said it had terminated the power purchase agreement (PPA) of its 3,960-Mw Tilaiya UMPP as land for the power station and related infrastructure has not been handed over despite a delay of five and a half years. Also, land acquisition for the captive coal block is yet to be initiated after a similar delay.RPower got the Tilaiya UMPP in February 2009. “Based on the present estimates of the land handover process, it is estimated that the project cannot be completed before 2023-24,“ Reliance Power said.

RPower’s decision is another setback for the government’s plan to set up giant power stations. The company won three of the four UMPPs awarded so far. It has completed the Sasan project, but put on hold the Krishnapatnam project that would have used imported coal. Tata Power built the Mundra project, but it also faced trouble and suffered losses because imported coal prices had risen. Government officials said various stakeholders had made progress in resolving pending issues.“A joint monitoring committee meeting was held in this regard on April 17 at Ranchi which was attended by officials of the Central Electricity Authority (CEA), state government officials and the developer where specific time bound commitments for handing over the land were made by state government,“ an official said.

RPower said its decision was in accordance with PPA provisions. According to experts, UMPPs require a few minimum things ready before construction begins. “Power purchase agreements and coal availability are the most important things for such projects. If a developer wants to exit in spite of these being available, it means more needs to be done,“ said Kuljit Singh, partner, infrastructure practice, at global consultancy firm EY.

Another expert, who didn’t want to be named, pointed to an inherent tussle between developers and authorities wherein the private firm takes very long to exit a project as it wants to protect bank guarantees.“Meanwhile, the government wants to show that it has not failed and this tussle leads to stuck projects. There have to be some milestones to enable easier exits for firms,“ the analyst said, requesting anonymity. Finance Minister Arun Jaitley had announced in this year’s budget plans to auction five new UMPPs in the “plug-and-play“ mode to ensure their smooth execution and help “unlock“ investments to the tune of . 1 lakh crore. He said five UMPPs, ` each of 4,000 Mw, would be auctioned this way to minimise the need for investors to secure multiple approvals. Under the “plug-andplay“ mode, coal linkages and indicative green clearances are expected to be ensured to simplify mining and faster execution.

However, experts think more is required to encourage investments in UMPPs. “The government needs to give funding support like they’ve given in the highways sector or rope in international players with deep pockets to get these projects kickstarted,“ Singh of EY said.

Source: Economic Times; 29 April 2015
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