Slow-Moving Power Projects Face Axe In Tamil Nadu

The Tamil Nadu Electricity Board will review all private power projects where the promoters have signed a memorandum of understanding with the board for power generation. Instead, the board is now considering going in for the bidding route.

This implies only three MoU projects Videocon, Spic Power and GMR Vasavi Industries are expected to survive. Power projects that are likely to get the axe include Balaji group, Cuddalore Power Co, Kedia Ind and CRSS Capital Corp.

Most of these agreements will be allowed to lapse if the progress is not satisfactory, top Electricity board officials told Business Standard.

The board does not think it will face legal problems like Enron in Maharashtra while scrapping the MoUs as most projects have made very little progress.

 

Preferring the bidding route for selecting private producers, the board authorities now feel that transparency and standardisation of performance parameters is a safer bet in the long run.

While Spic Electric Powers proposal is for a 1050 mw thermal plant at North Madras, Videocon will put up 525 mw thermal plant at Tuticorin. The GMR Vasavi group proposal is for a 200 mw diesel engine power plant at Basin Bridge.

Conveniently for the board, most of the MoUs are valid for approximately three years and most of them will come up for review or renewal during the current fiscal. For projects that have made some progress, the board is willing to give a three-month or six-month extension as provided under the MoU.

We are not comfortable with the strategy of signing separate MoUs with different private producers for independent projects, the source said, admitting that it was impossible to ensure that the board was getting the best deal on all the relevant technical parametres in every MoU project.

In 1995, the Tamil Nadu Electricity Board signed 16 MoUs with the private sector for generating about 10,800 mw. The total investment for all these projects was estimated to be Rs 43,200 crore.

For many independent power producers, scrapping of MoUs will turn out to be beneficial, analysts point out. Financial closure for the survivors will now be simpler, a source said.It will be now be easy to convince foreign funding institutions of the viability of power projects in Tamil Nadu. The state, it is pointed out, has the maximum number of projects on paper.