India's NTPC to Develop 4,000-Megawatt Ultra-Mega Power Project in Chhattisgarh

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Researched by Industrial Info Resources (Sugar Land, Texas)--NTPC Limited (BSE:532555) (New Delhi), India's largest thermal power producer, entered into a memorandum of understanding with the state government of Chhattisgarh for setting up a 4,000-megawatt (MW) ultra-mega power project (UMPP) in the state, following approvals received from the central government. The proposed plant will be developed in the Lara village, located in the northern district of Raigarh, which has abundant reserves of coal. The project is estimated to entail a cost of $4.1 billion. The facility will consist of five 800-MW units and is expected to require about 30,000 hectares of land. Scheduled for completion during the Twelfth Five-Year Plan (2012-17), the project will supply power to the states and union territories in the Western Region.

Plans for the development of a UMPP in Chhattisgarh were first proposed in early 2006, and the state was one of the five initially selected by the power ministry for the setting up of a UMPP. The other four states selected at the time were Gujarat, Karnataka, Madhya Pradesh and Maharashtra. The power ministry also established five special purpose vehicles as wholly owned subsidiaries of Power Finance Corporation Limited (BSE:532810) (New Delhi) for overseeing the development of these projects. Akaltara Power Limited (Akaltara, Chhattisgarh) was established as the special purpose vehicle for the state of Chhattisgarh.

The Central Electricity Authority identified a site in the Jangir-Champa district of Akaltara for setting up a UMPP in the state. However, the site was more than 160 kilometers away from the coal blocks in the Hasdeo Arand coalfields identified for the project. Subsequently, the Central Mine Planning & Design Institute Limited (Ranchi, Jharkhand) identified sites near the villages of Kedarpur, Khameria, Salka and Talangau in the Surguja district. The state government of Chhattisgarh then confirmed the availability of land near the Khameria and Salka villages. However, in August 2008, the ministry of power rejected the proposal to develop the power project at these sites on the grounds that a huge forestland would have to be cleared to make land available for the project.

The state and central governments have also been at loggerheads over the amount of power generated from the UMPP that would be allotted to the state. Chhattisgarh initially demanded that all the power generated from the UMPP be allotted to the state, with a free supply of 12% of the power output. However, the Union Ministry of Power shot down the state's proposal in May 2006, terming the demand for free power as a retrograde step and not in sync with the concept of UMPPs that are being set up for interstate supply of power. The UMPP met with another roadblock in August 2008 when the state government demanded that 50% of the power output of the UMPP be supplied to the state at production cost. This demand was also turned down by the central government.

The proposal was finally revived late last month following a meeting between Union Minister of Power, Sushil Kumar Shinde, and Chief Minister of Chhattisgarh, Raman Singh. However, some reports indicate there is no update on the amount of power output from the UMPP that will be allotted to the state, while other reports quote Shinde as having agreed to allot 50% of the power generated to the state government.

The power ministry has identified 14 sites for setting up UMPPs in the country. Of these, four projects have already been awarded. Reliance Power Limited (BSE:532939) (Mumbai) is developing three UMPPs in Krishnapatnam, Andhra Pradesh; Tilaiya, Jharkhand; and Sasan, Madhya Pradesh. Tata Power Company Limited (BSE:500400) (Mumbai) is developing the fourth UMPP in Mundra, Gujarat. The power ministry expects to invite a request for qualification this year for at least one of three proposed UMPPs for which sites have been identified in Kotipalli, Andhra Pradesh; Cuddalore, Tamil Nadu; and Bedabahal, Orissa. The Chief Minister of Uttar Pradesh, Mayawati, is also reported to have written to Prime Minister Dr. Manmohan Singh demanding the development of a UMPP in the state along with allocation of coal and gas linkages on a priority basis.

The Krishnapatnam UMPP, scheduled for commissioning by 2012, is now expected to be delayed by two years because of initial disagreements regarding the power generation capacity of the facility and the time taken by Reliance Power in tying up funds for the project. Five units of 800 MW each were to be developed according to initial plans. Now five units of 660 MW each will be set up in Krishnapatnam. The first units of the Sasan UMPP and Tata Power's Mundra UMPP are expected to come on stream by the end of the current Eleventh Five-Year Plan period, 2007-12.

In order to expedite the development of UMPPs, the central government plans to adopt several measures, such as more intensive monitoring and review at all stages of project development. The government also plans to seek the assistance of heavy engineering major Bharat Heavy Electricals Limited (BSE:500103) (New Delhi). In a related development, the central government has also ruled out the possibility of limiting the number of UMPPs that can be awarded to a single player on the grounds that such a move would be legally impossible.

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