Jindal India Faces $61 Million Cost Escalation for 1,200-Megawatt Dereng Thermal Power Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--Jindal India Thermal Power Limited (New Delhi) has incurred additional costs of about $61.63 million because of an eight-month delay in the construction phase of its new power plant located in the Dereng village in the Angul district of Orissa.

Work on the 1,200-megawatt (MW) Dereng plant, which was scheduled to commence in January this year, has barely made any progress. Although preliminary tasks such as leveling of the site, soil testing, and construction of a boundary wall started about three months ago, the main construction activities have been stalled, primarily because of problems acquiring land.

Despite the firm's lease agreement with Industrial Infrastructure Development Corporation of Orissa (IDCO) (Bhubaneswar, Orissa) for 793 acres of private land and 240 acres of state-owned land, local landowners continue to hinder project construction, demanding better compensation.

Hundreds of locals from Dereng and its neighboring Ghantianali villages are asking for a cash compensation of $30,831 per acre, in addition to one job for every evicted family. Based on the state's rehabilitation and resettlement framework, the landowners also are demanding that family members aged 19 and older each be recognized as an independent family and compensated accordingly. Jindal had offered a compensation of $15,308 per acre to each of the affected families and has almost completed disbursements to 90% of the ousted locals. The remaining 10%, however, have yet to claim their compensation due to other internal issues. The firm has since made a few unsuccessful efforts to resume construction at the site. Neither armed protection nor government persuasion have been of help.

The $1.22 billion Dereng power plant will consist of two units of 600 MW each. The first unit is slated to commence operations by September 2010. The coal-based pithead thermal power plant will be based on subcritical technology. Coal linkages for the project will come from a captive mining venture at the Mandakini coal block. Jindal, with two other partners, will jointly develop the block. The plant is expected to be fully operational by March 2011.

As India inches toward its capacity-expansion target of 100,000 MW through 2012, the Jindal Group seeks to achieve a total installed capacity of 5,400 MW of thermal power generation capacity in a phased manner over the next five years.

Land acquisition seems to be one of the major hurdles in India's ambitious push for addition of power-generation capacity. The process of determining legal landowners is also reported to be time consuming. According to data from the Ministry of Statistics and Projects Implementation, as of March 2009, three out of four power projects that have reported delays of one to three months have registered minor slippages during the land acquisition phase. The three projects are being executed by Power Grid Corporation of India Limited (BSE:532898) (Gurgaon, Haryana).

Two nuclear power projects also have recorded slippages, with the Kudankulam atomic power plant missing its deadline by almost a year. The delay in this case has been attributed to a lag in drawing finalization, as well as equipment supply.

In addition to displacement and rehabilitation of local population, obtaining environmental clearance is another key factor governing the timelines of renewable energy ventures in India, while sourcing equipment is also said to be an uphill task. Lack of recorded regional seasonal data, such wind speed, temperatures and rainfall, as well as biomass/waste products also could delay the preliminary stages of clean energy ventures.

The Union Ministry of Power has identified land, water sources, coal linkages and transportation to be the major problem areas for private power ventures in the country. In order to resolve these issues, the power ministry has called for consultation with the stakeholders to assess the issues regarding land, water, fuel supply, funding, and environment clearance. In order to provide an impetus to the pace of power project implementations, the power ministry has decided to recommend coal linkages and associated transport facilities to projects that have registered good progress.

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