Power Ministry vindicated but it still has much to do to make a success of the ultra-mega projects.

The receipt of attractive price bids for the first two ultra-mega power projects is a significant, albeit small, step forward in this ambitious Power Ministry programme to speed up capacity addition. Tata Power Company, with a bid of Rs 2.26 a unit for the Mundra project, and a consortium led by Lanco Infratech Ltd, with Rs 1.19 a unit for the Sasan project, have emerged the lowest bidders. They hope to achieve financial closure next year and get the plants on stream in 2010-11. This vindicates the Power Ministry's confidence of getting a good response; even the foreign companies not submitting price bids on the ground of insufficient time had not dampened the Ministry's enthusiasm when doubts were expressed about the projects.

When it announced the projects, the Power Ministry had said that economies of scale each ultra-mega power scheme would be of 4000 MW capacity, with a provision to increase it later would lead to cheaper electricity using the super-critical technology. The projects, fired either by imported coal in the case of coastal locations or domestic coal for pithead plants, would meet the power needs of a number of States. To make the projects attractive and to secure a good response, the Ministry had taken a number of steps through the creation of shell companies for each project that would obtain all the clearances and tie up for fuel also. From the bids and the price quoted for each project, it is apparent that their sheer size ensured the low price; lower than even that quoted by the public sector National Thermal Power Corporation. More important, the price quoted by the Lanco Infratech consortium for the pithead Sasan project in Madhya Pradesh is even lower than the NTPC operational plants' average tariff, which was Rs 1.64 a unit in 2005-06.

While the easier part has been accomplished, the more difficult task on hand has to be looked at with as much seriousness and urgency that of getting the power evacuation and transmission infrastructure in place by the time the projects are ready to feed electricity to the grid. Putting the evacuation and transmission infrastructure in place is as capital intensive as generation every rupee spent on generation requires a similar amount to be spent on transmission. If that is not done in time, then the whole exercise will be bootless. The Power Ministry needs only to look at the case of wind energy, especially in Tamil Nadu, to learn a lesson. The State has been leading in wind energy capacity addition, but the lagging evacuation and transmission infrastructure is forcing the shut down of turbines in peak wind periods. It is the Power Ministry's task to make sure that this does not happen in the case of the ultra-mega power projects.

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(This article was published in the Business Line print edition dated December 20, 2006)
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