Gujarat drops 4,000-Mw coal power project

Power-surplus state to look at more from existing units and renewable energy

The government of Gujarat has dropped  a proposal for setting up a 4,000-Megawatt (Mw) coal-based ultra mega power project (UMPP).

The current government under Vijay Rupani says there is surplus generation capacity and, instead of adding thermal power, wishes to focus for now on renewable power.

The Gujarat State Electricity Corporation was to handle the UMPP. Close to Rs 20,000-crore investment was required. Gujarat had housed the country’s first UMPP, when Tata Power started generation from its Mundra unit in 2012.

According to the state government, at a time when Gujarat already has around 30,000 Mw installed capacity, including from renewable sources, a new conventional power plant did not make sense. Average power consumption in Gujarat is about 12,000 Mw which increases to a peak of 16,000 Mw in summer. “Gujarat had proposed the UMPP last year but we now feel we do not need more; we already have more than sufficient generation capacity,” said Chimanbhai Sapariya, minister for energy.

The proposed site for the UMPP was near Gir Somnath district in the southern part of the Kathiawar pensinsula. The site was chosen for proximity with the upcoming port facility being built by the Shapoorji Pallonji group, as the plant was to be based on imported coal. 

The new decision is believed to be also in line with the Centre’s push to bring down coal import. However, the state government is willing to provide land for a UMPP if the central government wishes to initiate one, says Sapariya. Adding: “Our focus is now on renewable energy. The government will encourage solar power.”

The earlier United Progressive Alliance government at the Centre had planned for 16 UMPPs; only four could be awarded. While Reliance Power bagged three of these, only the Sasan facility in Madhya Pradesh is generating at full capacity. While Tata’s at Mundra and Reliance’s at Krishnapatnam (Andhra) are imported coal-based, those at Tilaiya (Jharkhand) and Sasan had captive coal mines. Mundra has been fighting a case for seeking a compensatory (higher) rate for five years. 

Reliance has exited the Tilaiya project due to regulatory delays and the procurers of Krishnapatnam generation are looking at cancelling the power purchase agreements, on the grounds of delay in commencement of the project.

Two planned UMPPs in Odisha and Tamil Nadu could not be awarded; private companies pulled out of bidding in 2014, raising concerns over the competitive rate-based bidding model. 

In 2014, the incoming National Democratic Alliance government set up a committee to redesign the UMPP bidding model. While the draft is yet to be finalised, no state has since expressed a desire to host a UMPP, said a senior official in the Union power ministry. Lags in demand and cash-strapped distribution companies prevent any surplus power sale, he added. The ministry has lowered its demand projection for 2022 by 17.3 per cent, to 239 Gw. Close to 20,000 Mw of power capacity is stranded for want of power supply agreements.

In this background, the Gujarat government is also not open to the idea of a private entity setting up another UMPP. It is planning to either upgrade generation plants or replace these with new technology. The decision was taken in 2015 — the aim is to reduce the cost of generation but enhance capacity utilisation of some of the older units.

The state is already one of the leading ones in renewable energy capacity. According to the Gujarat Energy Development Agency, installed solar power generation capacity in the state is a little over 1,200 Mw. The  government is promoting solar rooftop projects; last year, it announced a new policy on renewable energy.