Indian Power Ministry to Support Completion of Private Power Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Indian government recently announced that the power ministry will offer assistance to private power plant developers to ensure timely completion of ongoing projects in the wake of the current financial crisis. The ministry indicated that though the global economic crisis has not affected this sector drastically, many private players are facing problems with project financing. The ministry plans to take stock of the prevailing operational issues and ensure smooth and timely completion of ongoing projects.

The power secretary said that the Indian power industry is seeing unprecedented growth and that the contribution of private sector players in the power industry in India has been tremendous. The power ministry indicated that it can play an important role in alleviating impediments such as land acquisition delays and disputes, availability of water resources, transportation, coal block allocation, and linkages. Discussions will be held with independent power producers to assess fuel, water supply, environmental clearance schedules and availability of other feedstock. An action plan will be developed after consultation with the industry. Coal linkage and transportation support will be first extended on a priority basis to those projects that are in the final phases of completion.

India's total installed capacity as of January 1, 2008, was 141,000 megawatts (MW). India's additional power generation capacity target during the Eleventh Five-Year Plan (2007-2012) is about 78,500 MW. The ministry and the Indian government have therefore commenced monitoring of ongoing power projects to ensure that the target capacity is met. The power ministry also intends to enhance the transmission network of the national grid to ensure addition of new inter-regional capacities. Creation of special purpose vehicles have also been planned that will help in coal-block allocation, linkages, and expediting land acquisition and the environmental permitting process for ultra-mega power plants. Tariffs for power generated from these plants will be decided by the Electrical Regulation Commission once the projects are commissioned for commercial operations.

In mid-December, the ministry asked ultra-mega power project developers Reliance Power Limited (BSE:523939) (Mumbai) and Tata Power Company Limited (BSE:500400) (Mumbai) to advance plant commissioning deadlines to meet the Eleventh Five-Year Plan target. These included two 3,000-MW projects by Reliance Power in progress in Sasan, Madhya Pradesh, and Krishnapatnam, Andhra Pradesh, and Tata Power's 3,000-MW plant in Mundra, Gujarat, which were to be commissioned during the Twelfth Five-Year Plan (2012-2017). The power ministry has announced that both promoters have agreed to move forward the commissioning to the Eleventh Five-Year Plan.

In addition, units with capacities of 660 MW in Sasan and 800 MW in Mundra will be completed during the Eleventh Five-Year Plan. A unit at Krishnapatnam will also be ready for commissioning before 2012. Bulk power transmission agreements between Power Grid Corporation of India (BSE:532898) (Gurgaon) and the procurers as well as contracts between the procurers and the promoters have been initiated. The ministry will provide assistance to both companies so that the projects are commissioned within the deadline period. But the Tilaiya ultra-mega power project is facing delays. Bidding was put off four times, but was finally completed at the end of 2008. While there were 11 prequalified bidders initially, only Reliance Power, Sterlite Energy Limited (Mumbai), NTPC Limited (BSE:532555) (New Delhi) and Lanco Infratech (BSE:532778) (Hyderabad) participated. Many companies are facing a financial crunch because of the present economic crisis and have asked for time to make arrangements for funds.

The assistance offered by the power ministry and the stimulus packages announced by the Indian government include a 4% cut in Central Value-Added Tax across all industries, including power and full customs duty exemption on naphtha used for power generation in order to help power developers during the present economic situation.

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