Government considering norm changes on surplus coal utilisation, beside other cost issues, for pit-head projects, too.
The bidding norms for coastal ultra mega power projects (UMPPs) and those for pit-head ones are to undergo a change, delaying the ambitious project further.
The norms for pit-head projects are to be made tighter, to avoid contractual disputes. Besides, observations of the Comptroller and Auditor General (CAG) with regard to UMPPs would be incorporated in the revised bidding norms.
Among likely changes in the bid document is the purpose for which surplus coal from blocks given out with UMPP contracts can be utilised, a senior official told Business Standard.
“The option being considered is to allow incremental coal to be utilised in other power projects of the UMPP developer or to sell the incremental coal to (state monopolist) Coal India Ltd at a government-determined price,” said the official.
A draft of the new norms is likely to be put out for discussion shortly. The government finds itself in a fix on whether to allow coal from blocks given out with UMPPs to be used by the same developer. It has made this provision for the Sasan UMPP (in Madhya Pradesh) but if an explicit provision is not made in the bidding norms for other pit-head projects, it can lead to similar legal problems as in the case of Sasan.
Reliance had won the Sasan project in 2007. In 2008, an empowered group of ministers decided to change the rules to permit the company to use for other projects the surplus coal from the block allotted for Sasan UMPP. Tatas Power, which had also bid for the Sasan project, has challenged the rule in court.
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In the event of the government not permitting use of incremental coal — surplus ore from the allotted block — by the developer, questions can be raised on why an exception was made only in the case of Sasan, explained the official. An empowered group of ministers has referred the matter relating to use of incremental coal for Reliance Power’s Sasan and Tilaiya (in Jharkhand) UMPPs to the ministry of law.
In the revised bidding documents, the government would also need to state what is incremental coal. The decision would largely be based on the mining plan filed by the developers.
Experts say there is a need to make the bidding norms tighter in view of the changes on the ground but the issues facing these projects are “not killer concerns but minor ones”.
Kameswara Rao, executive director, PricewaterhouseCoopers, says clarity is required on use of incremental coal, as such a provision did not exist in the earlier bids at the time of inviting these. “It needs to be clarified what will happen to not just excess coal but also rejects and ash,” he said.
| STALLED UMPPs are 4,000 Mw thermal power projects envisaged by the government to plug the generation capacity shortfall. The first project was awarded in 2007. Since Feb 2009, no project has been awarded | |||
| Projects awarded | Developers | New commissioning schedule# | |
| Mundra, Gujarat | Tata Power | September 2011** | |
| Sasan, Madhya Pradesh | Reliance Power | January 2012* | |
| Krishnapatnam, Andhra | Reliance Power | ** | |
| Tilaiya, Jharkhand | Reliance Power | May 2015* | |
| #Central Electricity Authority *An empowered group of ministers permitted the developer to use extra coal from captive mines for its other projects. In the case of Sasan, Tata Power challenged the decision on the grounds that it was not explicit at the stage of bidding **Developers have cited the new Indonesian government policy prohibiting sale of coal at below benchmark price as the reason for delay. While work at Krishnapatnam has been stopped, Mundra plant is ready for commissioning | |||
| Projects in the pipeline | |||
| Sarguja, Chhattisgarh | Sakhigopal, Orissa | ||
| Sundargarh, Orissa | Ghogarpalli, Orissa | ||
| Cheyyur, Tamil Nadu | Coastal, Maharashtra | ||
| Tatiya, Andhra Pradesh | Coastal, Karnataka | ||
For the coastal UMPPs, he said the provision of making the increase in fuel cost a pass-through exists even in the current documents. “The bidders took a call (of not opting for it) that did not turn out to be correct,” said Rao. Officials said the ministry of power was also reviewing clauses related to the net worth criteria and stress-taking capability of the developer, in line with the CAG suggestions. Finalisation of the guidelines would take two to three months, pushing bidding for coastal and pit-head UMPPs to next year.
Rao said the government should have moved on with pit-head UMPPs that are based on domestic coal, as a delay would impact the capacity addition programme. Pending finalisation of new norms, the Union government has postponed bidding for the Bedabahal UMPP in Orissa and Sarguja in Chhattisgarh.