Fresh Concessions Offered To Bhadravati Power Project

The Maharashtra government has offered fresh concessions to the 1082 mw Bhadravati power project to enable the promoters Central India Power Co Ltd (Cipco), the Nippon Denro Ispat-led consortium maintain a 16.95 per cent internal rate of return.

The state cabinet is reported to have approved the incentives proposed by the energy ministry.

The concessions were being demanded by Ispat and two other promoters GEC Plc of the UK and EDF of France.

Recently, a high-powered committee of the Union government had rejected certain tariff allowances recommended by the Maharashtra State Electricity Board and the state government for the project. This would have lowered the IRR to 15 per cent from the 16.95 per cent agreed between Cipco and MSEB/government of Maharashtra.

The incentives now being offered by the state government are understood to be in line with the Centres revised guidelines for private power projects.

The incentive of 0.6 per cent for every one per cent rise in plant load factor above 68.5 per cent has been increased to 0.7 per cent. This will result in the internal rate of return increasing by 0.57 per cent.

The auxiliary consumption fee for coal-based power projects has been hiked from 8.18 per cent to 9.5 per cent. This move will lead to an increase of 0.35 per cent in the IRR for the developer.

Lastly, the guaranteed offtake of power by the Maharashtra State Electricity Board has been increased from 85 per cent to 87 per cent. The cabinet note argues that this two per cent increase in the offtake is required by the board. This measure would increase the IRR for the promoters by 0.52 per cent.

The cabinet note, prepared by energy secretary Asoke Basak, vouches that the levelised tariff of Rs 1.69 per unit would come down to Rs 1.62 after the incentives are doled out. The state finance and planning departments have also approved the incentives.

After the Centre shot down the earlier incentives offered by the state on allowances like operations and maintenance, and interest on working capital, the foreign promoters of the project GEC and EDF had expressed serious concern about their participation in the project.

In fact, Cipco director M R Rao had written to Basak, stating that overseas investors and bankers, who are standing behind this project patiently for over three years, are very much concerned with these unexpected developments and the resultant delay at this stage.