After buying from Reliance Power the Special Purpose Vehicle (SPV) formed for execution of the 4,000 Mw Ultra Mega Power Project (UMPP) meant to come up at Tilaiya, the Jharkhand government is looking to re-tender it.
However, the future of the UMPP scheme itself, launched by the Congress-led UPA government at the Centre in 2006, remains uncertain. Demand is not there and there is no clarity on the new regulations for awarding these.
Also, the present central government has raised its commitment in renewable energy (RE), announcing mega solar energy parks on the lines of UMPPs. It has announced 40 per cent of the country’s energy demand would come from non-fossil fuel sources under its Climate Change Policy.
“With the emphasis on RE, it might seem like we are fully utilising existing coal capacity. But, with per capital consumption of 1,100 units annually, India has a long way to go in thermal capacity addition. Maybe not now but in the near future, we would need more power. Coal will be a relevant fuel, especially for India – 60 per cent of our energy is from coal and we should not be complacent,” said R V Shahi, former Union power secretary who was involved in the first UMPP policy.
Officials at Jharkhand Urja Vikas Nigam (JUVNL) said the state was awaiting the new UMPP bidding rules to be cleared by the Centre. “Once the standard bidding document (SBD) for awarding a UMPP is finalised, we would tender Tilaiya again. It would be as earlier, based on domestic coal,” said one. Reliance Power, after a delay of 10 years, sold off its SPV to JUVNL for Rs 1.12 billion.
The present NDA government at the Centre had after taking charge in 2014 set up a committee to redesign the UMPP bid model. This was after private companies had declined to participate. While the SBDs are yet to get Cabinet nod, no state has expressed desire to host a UMPP, owing to lag in demand and cash-short power distribution companies.
UMPP tenders in Tamil Nadu and Odisha did not get any response from private players, which had complained about a flawed bidding model in 2014. In 2017, Gujarat started preliminary work for housing a second UMPP, after Tata Power Mundra, but gave up on the idea. In Union Budget 2014-15, the finance ministry announced setting up of five UMPPs under a ‘plug and play’ model. With SBDs are yet to get a Cabinet nod, the execution is held up.
The new draft guidelines for UMPPs suggest a plug and play model for imported coal-based plants — the government would facilitate land, environment clearances and evacuation. The developer would set up the project, arrange for the imported coal and sell power. To cushion buyers from fluctuating coal prices, the draft bid document suggests blending domestic with imported coal. For this purpose, the central government would facilitate coal supply for five years.
Shahi said while one had learnt from the earlier UMMP model, introduced in the new one, the power distribution issue is fixing. “The institutional framework of distribution needs to be revisited. UMPPs appear to be on the backseat but that is short-lived,” he said.
In the case of Tata Mundra, the only imported coal-based UMPP, it is facing legal trouble over escalation of coal prices globally and its non-recovery from power sale. The matter for awarding compensation to Tata Power has been pending for six years.
The Krishnapatnam UMPP (in Andhra) was won by Reliance Power and was to also be set up on imported coal. It has been stuck over clarity on imported coal price pass-through.
For domestic coal-based UMPPs, a committee has suggested a build-own-operate model, under which the Centre would commit coal supply on a linkage basis for the life of the plant.
Sources say Reliance Power would soon give up on Krishnapatnam. Mundra is working at sub-optimal capacity, unable to recover coal cost. The Sasan UMPP (in Madhya Pradesh), also by Reliance, is working at full capacity but the company has told the Centre it needs an additional coal mine. If denied, it could lead to giving up their stake.
From a planned 16 to four awarded and two functional, the mega UMPP dream of the UPA government did not fructify the way it was envisaged. The successor NDA’s try at revamping it is yet to bear any fruit.