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BGR, Kalinga Energy follow Tata Power, shelves thermal projects in Odisha

Back out due to poor fuel linkage; state to lose Rs 10,000 cr investments, 2,320 Mw power capacity

Jayajit Dash  |  Bhubaneswar 

Apart from poor coal linkages, thermal power producers in Odisha are also having to deal with weak power demand, delay in land acquisition and difficulty in raising credit

projects are gradually losing traction in with a clutch of developers deciding to shelve their planned projects. After Tata Power, Ltd and and Power have communicated their intent to scrap their proposed coal-fired projects in the state.

Chennai-based had proposed to set up 1,320 Mw coal-based power station at Bhapur in Odisha's Nayagarh district, committing an investment of Rs 6,287.93 crore. & Power Ltd, an Odisha-based developer, had sought to develop 1,000 Mw power project at a cost of Rs 4261.27 crore. It signed a memorandum of understanding (MoU) with the government in February 2009.

"Both BGR Energy and have written to the state government with an intent to shelve their projects. Without coal blocks or firm linkages, producers are finding it tough to commission their projects. Also, the scenario is shifting in favour of renewable power with tariffs getting more competitive”, said a state government official.

On its own, the state government has not renewed the lapsed pacts of and over their lack of interest to implement projects.

The walking away of thermal producers from their projects has posed a threat to Odisha's potential to emerge as a hub. Weak power demand, lack of or firm linkages, delay in land acquisition and difficulty in raising credit has prompted the promoters to draw back their plans. Between 2000 and 2014, signed MoUs with 30 IPPs with a total generation capacity of 37,000 Mw. The state government went on a MoU signing spree to secure long-term power security.

Though Odisha was already a power surplus state, the idea behind chasing coal-based power projects was to get power at competitive rates from the (IPPs) and sell excess power through its trading agency The sale of surplus power by either to the spot exchanges or to states with deficits through bilateral pacts was seen as a strategy to shore up its stressed finances. But, the strategy fell through as IPPs struggled to secure coal blocks even with the state government's recommendations. Later, Odisha lost its discretionary advantage to recommend award of coal blocks with the beginning of the system of transparent auctions. Some developers like Monnet Power who managed to win a after tough bidding found the unsustainable.

In the MoUs the state government signed with the IPPs, it was entitled to 14 per cent power share if a coal block was allocated to the developer. If no coal block was alloted, the state could still get 12 per cent of the power generated at variable cost.

"For IPPs, there is no coal block or the guarantee of a firm linkage in Odisha. This together with the trouble in land acquisition and longer break even periods due to cost and time overruns do not make thermal power projects a safe bet”, said a senior executive with a power company.

Most of the MoU bound power projects in Odisha have remained non-starters to this date. The ones that have commenced operations are Vedanta-owned Sterlite Energy, Ind-Barath (Energy) Utkal Ltd, and B C Jindal owned Ltd (JITPL).

First Published: Sat, May 13 2017. 23:54 IST