Land Acquisition Issues Delay in Construction of Lanco Babandh Power's Coal-Fired Power Plant in Orissa

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Land acquisition problems have delayed construction activities by almost one year at the coal-fired power plant promoted by Lanco Babandh Power Private Limited (Bhubaneswar, Orissa), a subsidiary of Lanco Infratech Limited (BSE:532778) (Hyderabad, Andhra Pradesh), in the eastern Indian state of Orissa. The project was initiated in 2006 and construction of the 2,640-megawatt (MW) facility was originally slated to begin during 2008. The scheduled date slipped by a year to 2009 due to problems in acquiring land for the venture, which now has been delayed another year as the issue persists.

The original plant site at Babandh was rejected for technical reasons, and the project shifted to Kharakprasad in the vicinity of Dhenkanal in 2008. Land requirements for the venture comprised 1,100 acres of tenancy land, and about 123 acres of government/forest land in the villages of Kurunti and Kharakprasad. Lanco's compensation package, which is based on the state's rehabilitation policy, included employment and skills training for affected families in the region. However, local residents demanded $32,476 per acre of land. However, the land acquisition proposal was pending with the state government due to local body elections in 2008. Meanwhile, with permission from the state government, Lanco initiated direct discussions with landowners, acquiring about 250 acres in the process. Notifications have been issued for acquisition of the remaining land.

The $972 million project, comprising four units of 660 MW each, has been planned in two phases. The first phase, which involves two supercritical 660 MW units, the first of which was scheduled for commissioning by 2011, has been delayed a year, due to land acquisition rows. Coal feed for the first unit of the venture will be sourced from the allotted coal block at the Talcher coalfields. In addition, Lanco is also likely to fall back on its coal sources in the Sundergarh district of Orissa to bridge shortfalls, if any. Water requirements will be met by sources close to the River Brahmani. Power generated from the project will be sold to the states of Maharashtra, Madhya Pradesh and Haryana.

Apart from the Lanco project, several other ventures in the state of Orissa have been delayed due to local opposition, general and local elections, and bureaucratic issues at both the central and state levels. A high-level review meeting in September 2009, attended by representatives from the government and private companies, revealed that about 14 mega-industrial ventures in the state have been stalled due to failure in land acquisition. Only 14,131 acres of land were cleared as of September 2009, out of the total requirement of 45,607 acres.

While local resentment prevented companies from taking possession of the allotted land, other issues such as rehabilitation and inadequate power and water influenced the delay. The POSCO (NYSE:PKX) (Pohang, South Korea) steel plant at Jagatsinghpur, due for completion by 2016, already has faced a two-year lag due to local protests. The central government recently granted clearances for POSCO to acquire forestland, subject to the condition that it does not infringe on the land rights of local village residents. The central government also has assured that land will be handed over to the company in four to five months, while advising an annuity payment to landowners to tide over any ownership sentiments.

View Project Report - 89001461

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project spending opportunity databases, market forecasts, high resolution maps, and daily industry news.