Macro Economy

Bids for mega power projects: industry worried over land acquisition provisions

Debabrata Das Richa Mishra New Delhi | Updated on January 22, 2018

Says move to divide land into ‘critical’, ‘non-critical’ will create confusion

While the Power Ministry wants to revive Cheyyur (in Tamil Nadu) and Bedabahal (in Odisha) ultra mega power projects (UMPP), potential bidders have called for resolving the issue of land acquisition first. The Ministry wants to get the bids rolling this fiscal.

Power developers are worried that the provisions on land acquisition in the proposed changes to bidding mechanism will lead to confusion and increase risks for them. The Power Ministry is proposing to divide land for power plants into ‘critical’ and ‘non-critical’. This is based on recommendations of an expert committee headed by former Chief Vigilance Commissioner Pratyush Sinha.

The potential bidders want the entire land requirement to be treated as one.

According to the proposal, while the ‘critical’ land defined for the use of achieving commercial operations is to be acquired by the state distribution utilities and handed over to the developer, the ‘non-critical’ land will be acquired by the developer after the project is completed and ready to run.

The entire cost of land — both critical and non-critical —– will be part of the power purchase agreement.

Industry officials said the risk in such a model is that the developer will have no say on what is ‘critical’ land requirement. Also, the additional cost on acquiring the ‘non-critical’ land has been capped at 10 per cent over the declared cost of the entire land mentioned in the power purchase agreement. “This goes against the concept of ‘plug-and-play’ model for UMPPs which was envisaged by the Government and also runs counter to the practical experience where two projects failed to lift off due to land acquisition issues,” an industry official said.

The industry’s other concern is to do with the social impact assessment (SIA) and environment impact assessment (EIA) which is required under the Land Acquisition, Rehabilitation and Resettlement Act.

Under current provisions, the SIA and EIA have to be initiated for the entire project. “The developer may not be able to justify initiation of SIA again for acquisition of more land for the same project,” the official added.

“If not a single land use bidding norm, at least the SIA and R&R package for both the ‘critical’ and ‘non-critical’ land should be concluded before the project is awarded and expressly mentioned in the power purchase agreement,” the official said.

There is also concern about the manner in which land is proposed to be acquired for the captive coal block. It has been proposed that the captive coal block land required by the power station for five years from commercial operations will be acquired prior to the project being handed over to the developer.

The remaining land will have to be acquired by the developer and leased to an infrastructure special purpose vehicle (SPV) which will be under the state distribution utility.

Published on October 13, 2015

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