Bses-Damodar Valley Thermal Project Cleared

The union government has cleared the 1000 mw Maithon Right Bank thermal power project to be undertaken by BSES and Damodar Valley Corporation (DVC) jointly.

The ministry of power's decision brings to an end all speculation about possible sources of funding of the project and its ownership.

Earlier DVC had been exploring the possibility of roping in the Power Grid Corporation (PGCL) as an equity partner. According to the DVC management, such an arrangement would have made power export easier as PGCL is the principal agency constructing transmission links.

However, the Asian Development Bank (ADB), which is a major lender to PGCL, has ruled out PGCL's equity participation in power generating projects. The other possibility of DVC taking up the project on its own with assistance from the Overseas Economic Co-Operation Fund (OECF) of Japan also hit a roadblock following the Japanese ban on new loans after the Pokharan blasts.

DVC chairman, A K Mishra, told Business Standard that the proposal for forming a joint venture will be placed first at the next meeting of the corporation which is due after September.

Mishra has clarified that the DVC Act of 1948 need not be amended for the joint venture. The Centre has concluded after several rounds of discussions that the Act has enough flexibility to enable DVC participation in the joint venture.

The clearance, however, is subject to the following six conditions.

* The project must not be export-oriented.

* The joint venture company will supply power only to those states which do not have excess coal reserves. The Centre has identified Rajasthan, Gujarat, Punjab and Haryana as possible recepients.

* Necessary clearance to float the joint venture must be obtained from two other co-owners of DVC - the Bihar and Bengal governments.

* Purchase of the equipment for the project must be through competitive global bidding.

* DVC and BSES must first prepare a commissioning schedule and place it before the Centre for approval before the project is taken up.

* Lastly, DVC and BSES will have an equal stake of 45 per cent each. The rest will be held by institutions.

Mishra further said that the formation of the proposed Power Trading Corporation (PTC) can help the joint venture to find buyers easily. The proposed corporation will co-ordinate between states with deficit power and plants generating surplus.

Though most states are now going through a power crisis, the signing of long term power purchase agreements with importing states is unlikely to be an easy task, felt Mishra.

A power purchase agreement has to be for 25 year span, which is the normal life span of a power plant.

If PTC takes charge, the agreement will be signed with the corporation and not with individual states.

The DVC chairman indicated that the four 250 mw generating units may be set up in two phases depending on the response in the energy purchase market.