Underlines need to learn from reasons behind delays; PFC head says issues being addressed.
Even as the two coast-based ultra-mega power plants (UMPP) facing an uncertain future, it has not stopped the Working Group on Power for the 12th Plan from recommending more coastal power plants based on imported coal, due to the rising shortage in domestic coal.
“Construction of more coastal power plants to operate on imported coal needs to be encouraged. However, it requires policy changes to address the risks in sourcing countries,” the working group said in its report. The need for changes in policy was triggered by the snail’s pace of the already awarded UMPPs. The group has set a target of power capacity addition at around 75,000 Mw in the 12th Plan (2012-17).
The report said power plants should be designed to operate with a high blend of imported coal. The Central Electricity Authority (CEA) has already issued guidelines for designing all future plants for 30 per cent blending. Coal imports are expected to reach 120 million tonnes by 2016-17, but ports and railways are not equipped to handle such a huge quantity. So, infrastructure expansion is a related need, it has noted. In the current financial year, imports are expected to be 86 mt.
Based on projections given by Coal India and Singareni Collieries (SCCL), availability from indigenous sources by the end of the 12th Plan for the sector would be only 450 mt against a total requirement of 842 mt, including the requirement of imported coal-based power plants.
The report said after taking into account 100 mt from captive mines, total domestic availability is projected to be 550 mt, a shortfall of 292 mt from domestic sources.
If 10 to 15 per cent blending with imported coal is considered, 55-82 mt of imported coal equivalent to 83-115 mt domestic coal would be required. Considering another 54 mt of domestic coal equivalent required for imported coal-based units, there shall still be a shortage of 155 mt (for 10 per cent blend) or 115 mt (for 15 per cent blend) from domestic sources. This means CIL/SCCL will have to increase domestic production to ensure supply of at least 565-605 mt from their mines, the report added.
The hurdles for the UMPPs, based on imported coal, include environment clearances, mining issues and land acquisition, all tough issues that had surfaced after the initial award of four UMPPs (the first was awarded in 2007). Since 2009, no new project has been awarded. Existing UMPPs have encountered other problems, too, such as the change in the policy of coal pricing by the Indonesian government.
Through rate-based competitive bidding, Reliance Power had bagged three of the four UMPP projects. These were at Sasan, Madhya Pradesh; Krishnapatnam, Andhra Pradesh, and Tilaiya in Jharkhand.
The fourth went to Tata Power at Mundra, Gujarat. The work has been stopped at Krishnapatnam UMPP, while the first unit of Mundra is ready for commissioning. A 4,000-Mw UMPP based on supercritical technology requires an estimated investment of Rs 16,000 crore.
Following the Indonesian government’s decision to benchmark coal prices to the international market retrospectively, R-Power and Tata Power have sought upward revision in power supply rates for Krishnapatnam and Mundra.
This has forced the government to relook at the guidelines for award of UMPPs for both pit-head and coastal projects. The matter has been referred to an empowered group of ministers for a final decision and the new guidelines should be announced soon.
In the latest meeting of eGoM, the government has sought Attorney General's opinion on the issue of UMPPs, including the tariff issue. However, the new norms will not be applicable to contracts retrospectively. Says Pramod Deo, chairman of the Central Electricity Regulatory Commission, “The UMPP projects were given out through competitive bidding.
Now, the beneficiary states have to agree to the new rates being asked by the developers. They can come to CERC either for a dispute or arbitration but nobody has approached us yet.”
The formulation of new rules delays award of more UMPPs. The initial bids (Request for Proposal, or RFP) for two new projects, one in Orissa and the other in Chhattisgarh, had already been delayed a number of times due to the ‘No-Go’ area controversy, environmental clearances and other hurdles.
Revision of the coastal regulatory zone guidelines have delayed the calling of bids for the UMPP at Cheyyur, Tamil Nadu. The RFQ process for the Orissa UMPP will be completed this month. For Chhattisgarh, there is still no clarity from the coal ministry.
Three more UMPPs – at Andhra Pradesh, Gujarat and Jharkhand -- are in the pipeline, for which land and site selection processes are on.
On the delay in award of UMPPs, Satnam Singh, chairman and managing director, Power Finance Corporation, nodal agency for award of UMPPs, said, “UMPP was an initiative at a time when the government thought of giving a push to the capacity addition programme. Therefore, these large individual projects were thought of. As we went ahead with the implementation of the projects, certain issues came up and they are being addressed.”
After a while, issues related to environmental clearance and land acquisition had started taking much more time, primarily because of a different viewpoint of the environment ministry and also the states. The land issue was partly addressed after reducing the requirements, a kind of evolution process, he said.
The first four UMPPs were meant for commissioning in the 12th Plan, and two bidders said they’d commission two units each of a project earlier than schedules. Tata said they’d commission the first unit in 17 months and RPower said by 36 months.
Hence, said Satnam Singh, there is no real delay, since the time lag is being measured from a preponed date. The first unit at Sasan was initially expected to come up in December this year, but according to a CEA update, it will only reach completion in 2013. Similarly, the Mundra UMPP of Tata Power is ready to start generation but the issue on the higher price of Indonesian coal is the hurdle.
In a written reply to a question in Parliament earlier this month, minister of state for power K C Venugopal said the problems faced were non-finalisation of sites due to local agitation, non-availability of water at pit-head sites, forest-related issues, particularly categorisation of Go/No-Go areas and delays in environment and forest clearances.
The CEA expected the first unit of 800 Mw of the Mundra UMPP in February 2012. The first unit of Sasan was expected in January 2013. According to the revised power purchase agreement, the first unit of Krishnapatnam is expected in June 2013 and the first unit of Tilaiya in May 2015.