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Home News Power Sector News Gujarat seeks second UMPP at Gir Somnath district

Gujarat seeks second UMPP at Gir Somnath district

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Demand for power within a state may no longer be a criterion for seeking mega power projects. Gujarat, the most energy surplus state in the country, wants another mega investment in power generation even as other states seem to be no longer interested in hosting ultra mega power projects (UMPP).

Gujarat housed the first UMPP in the country when Tata Power started generation from Mundra unit in 2012. If the second UMPP goes through, it would be the first thermal power generation project to be tendered by Narendra Modi-led NDA government, with amended bidding parameters.

Against the peak demand of 14,860 million units (kilowatt per hour), the peak availability in Gujarat is 15,480 million units. The state has 29,867.60 Mw of installed generation capacity, including renewable capacity of about 1,000 Mw. The state is, in fact, a leader in renewable power generation.

Power ministry has lowered its demand projection for 2022 by 17.3 per cent to 239 Gw.

Power ministry officials said the state has asked for an imported coal-based UMPP. An inter-ministerial group, representing power and coal ministries, visited the proposed site of the plant at Gir Somnath district in southern Gujarat. The site is close to the upcoming port facility being built by Shapoorji Pallonji group. This would facilitate transportation of imported coal, said the official.

With this project, the Centre is also likely to change its procedure for awarding UMPPs. "The Gujarat government requested the Centre for a UMPP. From now onwards, the Centre will plan power projects when states demand. Gujarat is anticipating increase in industrial demand. Also, it can export electricity to power-starved states in southern India and Rajasthan," said a senior government official.

The United Progressive Alliance (UPA) government had planned for 16 UMPPs across India, only four which could be awarded. While Reliance Power bagged three of these UMPPs, only Sasan facility in Madhya Pradesh is generating at full capacity.

While Tata Mundra and Reliance Krishnapatnam are imported coal based, Tilaiya and Sasan have captive coal mines. Gujarat's interest in UMPP comes at a time when both operational UMPPs and those, which were awarded but are yet to come up, are facing hurdles.

Mundra has been fighting a case seeking compensatory tariff for five years now with no closure in sight. Reliance has exited the Tilaiya project due to regulatory delays and procurers of Krishnapatnam are looking for cancelling power purchase agreements (PPAs) on grounds of delay in commencement of the project.

The two planned UMPPs in Odisha and Tamil Nadu could not be successfully awarded as private companies pulled out of bidding in 2014. Private players had raised concerns on the Design, Build, Finance, Operate, and Transfer (DBFOT) model. These projects were to be awarded on a competitive tariff-based bidding.

Even though Adani Power, CLP India, Jindal Steel & power, JSW Energy, Sterlite Energy and Tata Power showed interest in Tamil Nadu UMPP worth Rs 25,000 crore, none of them presented financial bid for it.

Even Odisha UMPP, which saw initial interest from Adani Power, CLP India, GMR Energy, Jindal Steel & Power, JSW Energy and Sterlite Energy, did not elicit financial bidding from any of these companies. Government-controlled NTPC and NHPC were the only ones left in the fray for Odisha UMPP, forcing Power Finance Corporation to cancel the bidding process. Power sector experts said the government needs to aim for securing offtake of power at this point of time, rather than creating more generation.

"There is no power purchase agreement for around 20,000 Mw generation capacity. The government needs to provide clarity on that and create demand. It is pertinent to source power from cheaper sources rather than just creating more sources," said Rupesh Agarwal, Partner, BDO India.

Another Delhi-based power sector analyst said Gujarat is an ideal spot for another UMPP as demand is likely to surge. He, however, added captive coal-based plants should be pushed as there is surplus availability of domestic coal.

The central government recently notified guidelines for the imported coal-based UMPPs. The UMPP would be awarded as 'plug & play', i.e. the government would facilitate land, environment clearances and evacuation. The developer would just set up project, import coal and sell power (Build-Own-Operate).

The guidelines propose pass through of variation in input cost to the final consumer. Also in a novel approach, to cushion the power buyers from the fluctuating coal prices, the central government would help with coal supply for five years and the option of blending cheap domestic coal would be provided. The amended guidelines are likely to be placed in Cabinet in a month's time, said officials.

Source- Business standard


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