Why Assam wants a power plant unplugged

Pratim Ranjan Bose Guwahati | Updated on November 11, 2019 Published on November 11, 2019

With 430 MW (57 per cent) power allotted to Assam, the State has little choice but to pay₹2.41 a unit fixed cost without taking delivery of any power   -  P_V_SIVAKUMAR

When power is available at ₹3/unit in the open market, N-E States are stuck in a take-or-pay deal with NTPC Bongaigaon at ₹5.6/unit

There are many examples of projects taken up on wrong fundamentals (for various reasons including political pressure) ending up as failures. The North-East offers many such instances.

But rarely you get an instance such as the 750 MW NTPC Bongaigaon (Assam), which has become an economic liability for the entire region so much so that the Assam government is now writing to the Centre to give NTPC a ₹1,000-crore largesse and save the State and the region from further bleeding.

At a time when electricity is available in the open market at a round-the-clock average price of ₹3/kilowatt-hour or unit, the North-Eastern States are in a take-or-pay agreement with NTPC Bongaigaon to buy power at ₹5.6/unit.

Ironically, it was Assam that convinced NTPC in 2006 to set up the power plant replacing a State government utility that never worked at more than 25 per cent capacity (plant-load factor). The State is now paying a heavy price for this.

Saving variable cost

With 430 MW (57 per cent) power allotted to Assam, the State has little choice but to pay₹2.41 a unit fixed cost without taking delivery of any power. The savings come by way of not having to shell out ₹3.2-3.4 a unit variable cost — the price of bringing coal all the way from West Bengal and Jharkhand.

That’s, however, not the end of the story.

It’s doubtful if NTPC Bongaigaon is buying cheap coal, like other utilities. Because, this plant is designed to use high quality coal.

High fixed cost

Since Assam coal has high sulphur content, the plant has a ₹500-crore de-sulpherisation unit as well. This partly explains why the fixed cost of the project is as high as ₹2.41 even when the land assets were available to the company at a token price of ₹1.

The other reasons for the high fixed cost are project delays, and the cost of bringing machinery all the way from the plains. The civil contractor was replaced. And the last unit was commissioned in March, seven years behind schedule.

With both the State Discom and NTPC remaining silent to BusinessLine’s queries, it is not clear what the final cost of the project was. Unofficial sources say it exceeded the original estimates of ₹4,720 crore by at least ₹1,000 crore. Assam is now asking theMinistry of Development of North-East region (DoNER) to foot this extra cost.

The appeal may get traction as all N-E States are involved. Bongaigaon allots 87 MW each to Meghalaya and Tripura; Arunachal Pradesh gets 38 MW; Manipur 56 MW; Mizoram 40 MW; and Nagaland 36 MW. Notably, each of these States survives on Central support.

It means the money that was supposed to be spent for development is merely going to support a white elephant. Development is taking a back seat as consumers are asked to pay ₹7.05 a unit average tariff in Assam.

The commercial sector is buying at a higher rate and it is anybody’s guess if that helps economic growth that too in this remote region.

Coal transportation

But the bigger question remains. If coal is available in Assam why is NTPC importing the fuel all the way from Jharkhand?

The short answer is that, as a thumb-rule a 750 MW plant requires 4 million tonne of fuel. But CIL’s North Eastern Coalfields produced as little as 0.5 million tonnes in 2015-16 (as mentioned in the company website), falling from 1.1 mt till 2010-11.

The long answer is everyone knew power grade fuel is hard to find locally. Still, a decision was made to build the plant, based on flowery projections.

Published on November 11, 2019
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