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Monday, 30 Sep 2013
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Unsteady road ahead for Odisha, Tamil Nadu UMPPs


The bidding process for the Odisha and Tamil N adu Ultra Mega Power Projects (UMPPs) was kick started by the Power Finance Corporation (PFC) in September 2013. A UMPP is a power project with 4,000 MW capacity and entails an investment of over Rs 20,000 crore.


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After awarding four UMPPs, the ambitious plans of setting up a total of 16 UMPPs were put on the backburner as no developers came forward to execute the other projects. The latest round of bidding for UMPPs is being done after a gap of five years.


The 4,000 MW Odisha UMPP near Bhedabahal village in Sundargarh district will be a coal-fired pit head power project to be set up on DBFOT basis. The coal will be sourced from the three captive coal blocks, namely Meenakshi, Meenakshi B and dip side of Meenakshi in IB Valley coalfield, allotted by Ministry of Coal for the project. Odisha Integrated Power (OIPL), a wholly owned subsidiary of PFC, is undertaking the bidding process for the Bhedabahal project. The beneficiary states are Odisha, Punjab, Haryana, Madhya Pradesh, Rajasthan, Uttar Pradesh, Tamil Nadu, Uttarakhand and Chhattisgarh. So far, the cost of land has been deposited with the Odisha government and section 11 for award of land has been issued. Water linkage is also available from the Hirakud reservoir.


The bidding process for the Tamil Nadu UMPP is being undertaken by Coastal Tamil Nadu Power (CTNPL), a wholly owned subsidiary of PFC. The 4,000 MW UMPP will be located at Cheyyur in Kancheepuram district of Tamil Nadu. The Cheyyur UMPP will be a coastal power project, along with a captive port at Panaiyur. The UMPP will be fuelled by imported coal which has to be arranged by the selected bidder. The project will be developed on DBFOT basis and Tamil Nadu, Karnataka, Andhra Pradesh, Maharashtra, Kerala, Uttar Pradesh and Punjab will be the beneficiary states.


For the Cheyyur UMPP, section 4(2) has been issued under the Tamil Nadu Land Acquisition Act. Forest clearance as well as the permission to use sea water for the project has been accorded. Environment clearance for the power station and the captive port has also been recommended by an Expert Committee of Ministry of Environment and Forests (MoEF).


The bidding process for UMPPs has been re-initiated on the basis of the revised Standard Bidding Documents (SBDs) for Case-II power plants, which were approved by an Empowered Group of Ministers (EGOM) in April 2013. Case-I power projects are where developers have the choice to decide on location, fuel and technology to be used. In case of Case-II power projects, the location of the project and fuel to be used are already decided before the start of competitive bidding.


However, as stated by the industry experts and even the Association of Power Producers (APP), it is most likely that the bidding process may receive a lukewarm response. The reason being that, under the current scenario, very few power producers may find a UMPP a viable investment proposal. As UMPPs require huge funds, only companies with a strong balance sheet can bid for these projects. Land acquisition for the projects is also not completed; this might discourage several potential bidders.


As per the new SBDs, the developers have to compulsorily buy equipment from domestic manufacturers such as BHEL, L&T etc. However, the fact that no domestic manufacturer has a proven capacity for making 660 MW equipment, may prove a major hindrance.


The SBDs also state that the lead member has to get government approval for land acquisition and necessary licences and statutory clearances for the plant and coal block development within 120 days of signing the Power Purchase Agreements (PPAs). The lead member for the Bedabahal UMPP being Gridco, the Odisha government has pitched for changes in the bidding norms, as it is not possible to get all the clearances done in 120 days.


Another issue is that, even though it is proposed that the two UMPPs will be linked to the surplus coal policy; the policy itself is yet to be finalized. Till now, the basic concept of captive mining by private companies is that the coal obtained from a captive block shall be used entirely and exclusively for the specified project by the allocated company. The surplus coal policy once finalised, will enable the usage of excess coal from the mines allotted for one particular project to another project by the same company. The policy will have more weightage in the case of the Sundargarh UMPP, as the plant will be fueled by captive coal blocks.


As a means to expedite capacity addition in the power sector, the Union Ministry of Power envisages setting up 16 UMPPs in the country. So far, only four UMPPs have been awarded. The first was the Mundra UMPP in Gujarat which was awarded to Tata Power. Reliance Power bagged the other three UMPPs -- Sasan in Madhya Pradesh, Krishnapatnam in Andhra Pradesh, and Tilaiya in Jharkhand. Out of these four, the Krishnapatnam and Tilaiya UMPPs are still in the planning stage.


The Investment Committee set up by the UPA has directed the power ministry to award at least two UMPPs by March 2014. However, with land and coal linkage issues still lingering on, not many private developers will come forward to take up these projects.


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Quote of the week:


Ashok Khurana_Association of Power Producers_ProjectsToday

"I do not think the UMPPs are ready for bidding today. In the new norms, the land has to be acquired within six months. That has not been done. Also, the liberalised coal policy is not in place. We feel that today looking at the position of Odisha project; we are not in a condition to bid for it,"

Ashok Khurana, Director General, Association of Power Producers (APP)


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