Govt looks at proposal to bid out UMPPs to meet rising power demand

The government is examining a proposal to bid out UMPPs to meet the rising power demand in the country, Power Minister R K Singh said Tuesday.

"If I bid them (Ultra Mega Power Projects ) out today it would take 4-5 year to fructify, by that time demand would have again accelerated. So I think, the time has come to start bidding out UMPPs," he said addressing 98th Annual session of Assocham here.

UMPPs are 4,000 MW super thermal power projects (both pit head and imported coal based).

The UMPP programme was launched in November 2005 with an objective to develop large capacity power projects in India by providing to developers services like land, coal, fund tie-up and clearances under one roof.

Under this scheme, two projects at Mundra and Sasan were set up and made operational by Tata Power and Reliance Power, respectively. Reliance Power exited the Tilaya UMPP earlier this year and is trying to exit Krishnapatnam UMPP. After that no UMPP was bid out.

Power Finance Corporation (PFC) was appointed as Nodal Agency to facilitate the development of these projects.

The government has been talking about firming up of standard bidding document for domestic as well as imported coal-based UMPPs and getting Cabinet approval for that. But that has not happened so far.

Experts believe that before going ahead with the bidding of UMPPs, the power ministry should get the standard bidding document approved from the Cabinet.

Talking about stress in the power sector, the minister blamed the developers for aggressive bidding and quoting unviable power tariff with an eye on capitalising coal blocks tagged with power projects.

"The fault is on owners' side. Of course the coal block cancellation was a major setback. Availability of coal is an issue. Some of you bid unrealistically. You bid rates which were not viable because you thought that you (developers) could make the difference by selling coal in the open market," Singh said.

Elaborating further, the minister said:"You had your eyes on the coal block and not on the power to be generated (from the project).You thought that you could make it (power tariff) up because you have a coal mine.

"That is the problem of our country that we don't think straight. If we think straight then such thing will not happen. We try to cut corners. That was the major reason (for stress)."

He also made a point that bankers financed projects at the cost of Rs 8 crore per MW and suggested that they should be taken to task for that. Normally, per MW cost of a power project ranges from Rs 5-6 crore.

However, he exuded confidence that all these stressed assets are going to be profitable because the country's power demand has been growing at 7.5 per cent which is around 9 per cent at present.

On the coal shortage, he informed that power plants are not getting the coal rakes they need at any given day.

Suggesting remedy for that he favoured giving coal mines to private sector to mine coal for selling them in open market.