Mega size power projects were considered essential towards achieving the ‘Power for all’ goal. Conceptualised by the Planning Commission, Ultra Mega Power Projects (UMPP), each of 4000MW capacity, in the build, own and operate (BOT) mode to be spread around different states were given shape. Nine projects were initially identified: four of them were pit head plants and the other five coastal plants using imported coal.
In 2006, Power Finance Corporation (PFC) was appointed as the nodal agency.
Shell companies were formed under PFC for each project’s development activity and for bidding. The shell company was expected to tie up all clearances such as land, water, coal block, public hearing, environmental clearance, forest etc., before bidding. It would make the project report before bidding and was expected to complete land acquisition. These shell companies were to be transferred to the successful bidders for executing the projects.
Everything looked well-planned. The bidding for Sasan, Mundra, Krishnapatnam and Tillaiyya attracted corporate bigwigs. Tatas won the Mundra project while Reliance bagged the other three. Tillaiyya was the last contract to be awarded in 2009. Project activities in Mundra and Sasan started in right earnest and the shell companies were transferred to Tatas and Reliance. Tatas were able to commission all the five units in Mundra (each of 800MW capacity) by March 2013 and these are in commercial operations now. In Sasan, there were long delays and the first unit alone went into operation (660MW) in 2013. Reliance commissioned the last unit in March 2015.
The successful commissioning of the Mundra and Sasan projects, even if delayed, generated hopes that the other UMPPs will also come up soon providing relief to the power sector. Sadly though, these are the only two UMPP projects, which are now generating power. No other UMPP has taken any significant shape and none of them will be operational for the next 5 years. Even for Mundra and Sasan, how long they will run is a question now, since both the projects are facing problems.
Tata Mundra UMPP is in financial trouble, as it uses imported coal, the price of which has gone up. In May 2012, Tata announced a huge loss for the 2011-12 financial year. In response to its financial crisis, Tata has been lobbying the Government to allow the increased cost of its imported coal to be passed to customers. Permission has been sought to revise the power rate from the contracted Rs 2.26 per unit to Rs 3. It is being projected that at the current power price the project would face losses of around Rs 1800 crore per year. As a part of the lobbying, Tata has announced that it will suspend work on all its other power stations relying on imported coal. This affects its Coastal Maharashtra Project (2400 MW capacity).
The outcome of this lobbying is uncertain
The ministry of Power has referred the request for increased costs to be passed through to the Central Electricity Regulatory Commission (CERC), which is undecided. A decision to allow Tata to increase the recovered price may be subject to legal challenge. Even if CERC rules in favour of Tata Power, other bidders and State Electricity Boards who signed power agreements with Tata Power are bound to challenge the order.
Based on the Supreme Court verdict that coal from mines allotted specifically for the UMPP projects cannot be diverted to other projects. Coal ministry has calculated that the entire output from Chhatrasai mine and four million tonnes of coal from the Mohar and Moher amiuhri mines, would be surplus for this project. Accordingly coal ministry has de-allocated the surplus block and is working on modalities to cancel possible diversion of 4 million tonnes of coal from the other two operational mines. Reliance has now gone to court questioning this de-allocation.
Reliance has officially withdrawn from the Tillaiyya UMPP (Jharkhand) quoting the abnormal delay in getting the required land from the State government as the reason. They have stopped all work in the Krishnapatnam UMPP (A.P) citing the increase of Indonesian imported coal price as a reason. The matter is in court now. The Chhattisgarh Sarguja UMPP is a non-starter because of the refusal of Environment Ministry to clear the identified coal blocks for this project since they are in the midst of dense forest. Due to strong local agitations at Giriya and Tadri sites, the Maharashtra and Karnataka state governments agreed to identify new coastal locations for the UMPPs allotted to them. This is yet to be done.