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Home News Power Sector News Central Government may limit number of UMPPs awarded per developer

Central Government may limit number of UMPPs awarded per developer

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Jairam RameshThe government may revive a proposal limiting the number of Ultra Mega Power Projects (UMPPs) awarded per developer. “We need to give a thought to the desirability and the feasibility to limit the number of UMPPs per bidder,” said Jairam Ramesh, minister of state for commerce and power.

UMPPs are the centre-piece of the government’s attempts to add over 50,000 Mw of power generation capacity through 13 such ultra mega projects that will come up through competitive bidding by private power developers. Much of this is expected to come up over the twelfth Plan starting 2012.
Reliance Power has also bagged the UMPPs in Sasan, Madhya Pradesh and Krishnapatnam in Andhra Pradesh, leaving the industry worrying about the government committing a huge chunk of power capacity to a single developer. Tata Power won the fourth project, in Mundra, Gujarat.

A proposal to impose a limit was made about a year back but was turned down by an Empowered Group of Ministers (EGoM) in November 2007 in the interests of increasing competition. Instead, the EGoM recommended putting stringent performance guarantee mechanisms in place to ensure companies do not overstretch themselves to bag UMPPs.

Companies bidding for UMPPs are initially required to pay a bid bond of Rs 120 crore, which was to be replaced by a performance guarantee of Rs 300 crore that the successful bidder has to pay.

After the revision of the performance clause by Power Finance Corporation (PFC), the successful bidder has to pay a higher financial guarantee that is 50 per cent higher than the previous amount to become eligible for additional UMPPs.

Accordingly, Reliance Power is expected to pay a financial performance guarantee of Rs 600 crore in a few weeks for bagging its third UMPP at Tilaiya.

Source - Business standard


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