The pulling out of four qualified private sector bidders for the Odisha and Tamil Nadu ultra mega power projects (UMPP) recently creates an uneasy foreboding. It is a big blow to the celebrated UMPP series that was envisaged in 2006 and what was once considered as India’s biggest enterprise in the power generation sector.
Why the private sector has had a cold approach towards the two UMPPs is difficult to comprehend as no reasons have been cited officially. It is even more intriguing to see private sector indifference in wake of the new standard bidding document that has allowed for a tariff hike, should there be any variation (rather increase) in coal prices. It may be recalled that Tata Power had a tough time honouring the quoted tariff for its Mundra UMPP when prices of fuel (Indonesian coal) unexpectedly shot up. It was only after much deliberation that CERC allowed for an upward revision in tariff.
The new UMPP guidelines also made it mandatory for equipment to be sourced from domestic equipment makers. This could have possibly upset some developers as Indian power equipment could come at a higher price and with a longer lead time, when compared with Chinese equipment. It is worth noting here that three out of the four UMPPs so far commissioned have deployed Chinese main plant equipment.
The UMPP series envisages around 16 power generation plants, each with installed capacity of around 4,000 mw and with efficient supercritical power technology. As of now, only four have been commissioned and the bidding process for another two is underway. As for the overall progress, it has quite belied expectations. The waning interest of private developers in the Odisha and Tamil Nadu UMPPs does not bode well for future projects. The new land acquisition act and uncertainties with coal linkages can further impede progress.
At this stage, the UMPP endeavour appears to be heading into oblivion. India does have private enterprise but the UMPP series, where a single project could cost over Rs.20,000 crore, needs private developers with high capital base and risk-taking ability. With big names shying away from UMPPs, there is clearly a dearth of developers.
In this adversity, the government has an opportunity on hand to rework the policy framework and rekindle private enterprise. UMPP needs an ultra mega policy push.