Mega power projects: Developers frown on biz model, land acquisition proposals

Richa Mishra Debabrata Das New Delhi | Updated on January 23, 2018


Govt urged not to take hasty decisions based on Pratyush Sinha panel proposals

Companies interested in setting up ultra mega power projects (UMPPs) are a worried lot.

Some of the proposals, particularly on business model and land acquisition, being suggested by the high-level committee, have become a cause of concern for the developers, who want the government not to take any hasty decision.

At a recent meeting where the salient features of the draft report on bidding documents for UMPPs where shared with developers, the Pratyush Sinha Committee has suggested that land acquisition for projects will be split into critical and non-critical categories. This has the developers worried, who feel that the piece of land which may be non-critical at present could become critical at a later date.

“We haven’t seen the fine-print of the proposals yet. At the meeting we were just given a presentation of the draft’s salient features. We don’t know how the land can be defined as critical and non-critical, as at the pit head every bit of land is critical. You need land to develop infrastructure. It is still unclear,” an industry player said.

Industry has suggested that as proposed by Finance Minister Arun Jaitley in the Budget, the government should adopt the plug-and-play model. Jaitley had said that the government proposes to set up five new ultra mega power projects, each of 4000 MW in the plug-and-play mode. 

All clearances and linkages will be in place before the project is awarded by a transparent auction system. This should unlock investments to the extent of ₹1 lakh crore. 

The second issue which is worrying the developers is the suggestion in the draft which proposes that Power Finance Corporation will need to float two SPVs – one for infrastructure and another for operation. The current mechanism works through one special purpose vehicle floated by PFC.

“We are not sure how this will help. We will have to see the operational, legal and accounting implications of such a model,” an industry player added.

The Power Ministry is expected to put up the draft for public comments shortly.

At present, only two ultra mega power projects have been fully commissioned – one in Madhya Pradesh (Sasan) and another in Gujarat (Mundra).

The industry feels that the country has installed power capacity of around 2,50,000 MW working on about 59 per cent plant load factor. The installed capacity, if fully utilised is sufficient to take care of immediate requirements and the government can go slow on UMPPs and take three-four months time, another official said.

Published on August 11, 2015

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