Fresh push for private power

In an attempt to kickstart the development of private sector power projects, the power ministry has called a high-level meeting of stakeholders next week to seek financial closure of 8,000 mw, low-tariff projects. These include those promoted by the BPL and Torrent groups.

"We will be holding a meeting with about 20 independent power producers on January 13. The meeting will focus on achieving financial closure of projects with 8,000 mw capacity," Power Secretary RV Shahi said here today at the 2004 India Power Conclave.

Shahi said his ministry had identified the Torrent-promoted 1,000-mw project in Gujarat for financial closure before March 2004. The Hyderabad-based GVK group, which is setting up 600 mw of gas-based capacity, and the BPL group, responsible for developing a 500-mw project in Andhra Pradesh, are also on the list.

The meeting will be attended by State Bank of India Chairman AK Pawar, besides senior officials of ICICI, IDBI and the Life Insurance Corporation of India (LIC). Power and finance secretaries of the respective state governments will also attend. Financial closure will mean that all the funds for the projects have been tied up enabling their execution.

Shahi admitted that tariff had been the main criterion for selection of the projects and the meeting had been restricted to those projects which had acceptable tariffs i.e., in the range of Rs 2-2.50 per unit.

The secretary said besides tariff, the ministry had also selected the projects after factoring in issues like volatility of fuel prices. Shahi said following the recent enactment of the Electricity Act, 2003, the attitude of investors towards the power sector had undergone a sea change and they were evaluating projects without looking for payment security mechanisms.

The Electricity Act, passed last July, permits the sale of power to consumers directly, doing away with need for sale to third parties like state electricity boards, whose financial health are in doubt.

The insistence on the sale to state boards has resulted in a spate of high-profile debacles and exits, including the Enron-promoted Dabhol project, which has been lying idle for the past two years.

International players like CMS Energy and AES have also opted to exit the country.

Inaugurating the two-day conclave, Power Minister Anant Geete said the Centre had been begun focusing on transmission and distribution losses and had set up the Accelerated Power Development and Reforms Programme to fund reforms in the sector.

He said the Centre had set aside as much as Rs 40,000 crore over the next five years for funding such reforms, with half the corpus being set aside as incentive to state boards, and the remainder was earmarked for new projects.

Geete said the government was targeting to double power generation capacity over the next 8-10 years. He added that an additional 100,000 mw of generation capacity would be established in the period.