Orissa withdraws condition on profit contribution by UMPPs

The Orissa government has withdrawn its condition relating to the contribution of 5 per cent of profit by ultra mega power projects (UMPPs) for the peripheral development fund. This has boosted the implementation of two UMPPs with a generation capacity of 4,000 Mw each in the coal-rich state.

“The Orissa government has responded positively and withdrawn its stipulation relating to the contribution of 5 per cent of profit by each UMPP for the peripheral development fund. This is a welcome move,” ICP Keshari, joint secretary in the power ministry, told Business Standard.

Due to the condition imposed by the Orissa government in 2008, state-run Power Finance Corporation, the nodal agency appointed by the Centre for the development of UMPPs, was unable to initiate the bidding process.

The power ministry in its subsequent communication to the state government had told that such a measure would have an adverse impact on electricity tariffs and would encourage other states to take similar steps.

Further, the ministry noted that the experience of UMPPs awarded to the lowest bidders in Sasan, Mundra, Krishnapatnam and Tilaiya so far had clearly justified the government’s move to obtain the lowest possible electricity tariff.

Therefore, the ministry reiterated that any measure that artificially raises the tariff from these UMPPs would tend to vitiate this initiative. Reliance Power has bagged the 3,960-Mw Sasan UMPP in Madhya Pradesh by quoting the lowest per unit tariff of Rs 1.19. The company also won the 3,960-Mw Krishnapatnam UMPP in Andhra Pradesh at Rs 2.65 per unit and the Tilaiya UMPP (3,960 Mw) in Jharkhand at Rs 1.17 per unit.

Tata Power emerged the lowest bidder — at Rs 2.65 per unit — for the imported coal-based 4,000-Mw UMPP at Mundra in Gujarat.

The power ministry had told the Orissa government that the resource-rich states were already compensated through different measures. In addition, it also informed the Orissa government and other states that 50 per cent of power from new UMPPs, where the allocation of power have not already been made, would be made in favour of the “host” states.

Moreover, the ministry had suggested the Orissa government to implement the National Relief and Rehabilitation Policy only and not go beyond it.

PFC would invite the request for qualification for a UMPP in Chhattisgarh in February.