The Hindu Business Line : Teething troubles for ultra mega power projects

New Delhi, July 2 Despite the Government’s attempt to tide over power shortages through the setting up of Ultra Mega Power Projects, the stalemate over the first couple of these ambitious 4,000 MW projects continues.

While the Sasan project is mired in a bidding controversy, the Tata Power-controlled Mundra project, the schedule of which has already been pushed back on account of delays in statutory government clearances, is now stuck at the regulatory stage.

The project’s petition for adoption of tariff, which was submitted to the Central Electricity Regulatory Commission (CERC), way back in February, is yet to get cleared, delaying the process of financial closure for the project, sources said.

Coastal Gujarat Power Ltd — the special purpose vehicle formed to ensure the initial clearances for the project — had filed a petition for adoption of tariff way back in February 2007 with the CERC. The regulator had subsequently sought preliminary clarifications in early March, which were submitted by the third week of March.

On March 23, however, the then CERC Chairman, Mr A.K. Basu, retired, creating a lack of quorum.

At that time, there was only one functional member in CERC, while the Chairman of the Central Electricity Authority (CEA), who is also an ex-officio member of CERC, could not be part of the CERC process since he was already appointed as part of the Apex evaluation committee which decided on the bids for the project.

The award of the project to Tata Power in late April was behind schedule by a couple of months due to statutory State clearances.

While on May 10 a new member was appointed by CERC, the tariff clearance is still to come through.

Key requirement

Though the adoption on the tariff by the CERC is seen as a formality since the project was awarded on the basis of competitive bidding, the process, however, could be a key requirement for financial closure as lenders would like all the clearances in place before pledging funds, sources said.

The teething delays in the first set of projects have already wiped out the prospect of even a single Ultra Mega Power Project unit getting operational during the current Eleventh Plan period. This is despite the Centre having issued Letters of Intent to the promoters of the first two projects — Tata Power Company for the proposed Mundra project and the Lanco-Globeleq combine for the Sasan project in Madhya Pradesh — way back on December 28 last year.

According to the Government’s initial estimates, the transfer of the shell company to prospective promoters, besides the signing of the power purchase agreements and the submission of bank guarantees, was to have been done within 60 days of the issue of letter of intent — by February 26 this year.