Stuck NTPC Talcher thermal project losing relevance amid muted demand

NTPC’s Talcher project in Odisha, where bidding for a boiler turbine generator (BTG) contract was conducted way back in July 2018 with BHEL as sole bidder, is a classic case of how thermal projects have lost steam in the country.

It is not just that the Odisha government delayed environment clearance, which finally came less than a year back. Even the unwillingness in taking a decision on the BHEL bid has worked in favour of the country’s largest power producer that is pulling itself out of coal-based generation. 

NTPC had issued a tender for the main plant package, comprising supply and installation of two units of 660 Mw at the Stage-III Talcher project. It was to accompany dismantling of two existing units that are based on old technology. 

While BHEL submitted the sole price bid which was opened on March 14, 2018, a formal placement of order has not been done. “NTPC is yet to take a call on finalising the order for the Talcher project,” a BHEL spokesperson said in an emailed response when asked what has delayed the execution of the contract.

An NTPC official did not answer queries on delay but said, “We are both responsible companies that together contributed immensely to growth of the power sector. We have worked closely for years and discussions are being held at various levels on the subject for a solution.” The Talcher contract has also been on top of the mind of investors with the BHEL management being asked questions on the reason for delay in orders being placed on the company. 

Manoj Verma, director (power) for BHEL, in a June investor call, admitted that many projects which had been finalised were getting deferred over the last year. 

The Talcher 2x660 Mw contract “is still to be finalised and converted into a regular purchase order” by NTPC. A regular purchase order would mean that the single bid is accepted by NTPC.

BHEL is believed to have quoted a total around Rs 5,300 crore, which did not include taxes. Persons close to the development said there would be cost overrun of approximately four to six per cent. This amounts to Rs 200-300 crore. This could translate to an additional 20-25 paise in tariff for Odisha consumers since the plant is expected to supply electricity to the state under the regulated power tariff regime.

The central government-owned company had taken over the project from the state in 1995. It draws coal from Jagannath mines of Mahanadi Coalfields and water from the Brahmini river.

An industry insider said NTPC – that generated 290 billion units in 2019-20 – may not be interested in the project though the company has the land and existing units that are scheduled power suppliers to the state. 

“Our company has changed focus and is pursuing renewable capacity addition aggressively. We have taken the decision not to acquire any further land for greenfield thermal projects in the near future. The focus will be on reducing the carbon footprint,” Gurdeep Singh, NTPC chairman and managing director, told shareholders at the recent annual general meeting. The Talcher plant comes under its existing portfolio and the company may not give up on it. The general low plant load factor – especially among thermal power plants due to muted demand – could be the reason the company is not pushing for a resolution of the BHEL bid. 

Scaling up the power output from 460 Mw to 1,320 Mw would not make much sense in the current environment where renewable is being pushed. The old plant would, however, require to be dismantled in order to meet the regulatory guidelines on using new generation technology.