3 firms left in race for UP power project

Three power companies are left in the race for the 1,000-MW Anpara C thermal power project in Uttar Pradesh. The companies are Reliance Energy Generation Ltd, Essar Power Ltd, and Lanco Kundapalli Power Pvt Ltd. The process of awarding the contract is likely to be finalised by September.

To find a private entrepreneur, the UP Power Generation Corporation Ltd had floated global tenders in November 2004. The last date for buying the "request-for-proposal" documents, costing Rs 10 lakh, was May 10, and only three companies turned up.

The financial closure for the Anpara C thermal project is likely to be initiated as soon as the technical bid document is finalised, and is expected to be completed by the end of October. The successful bidder would be required to commission the power project in 48 months from the date of the award of the contract.

The bidders will now be required to submit the technical bid documents and the process will be through in 150 days.

The guidelines laid down by the Union power ministry require the process of awarding the contract be completed in 365 days from the date of issue of the request for proposal documents. The state government, however, in view of the acute power shortage, has reduced the timeframe to 50 days.

The successful bidder for the Anpara C thermal project will be given a plot of 80 acres on lease for 30 years at the annual lease rent of Rs 100 per acre. Two thermal units, Anpara A and Anpara B, are already in operation since 1993, generating 1,560 MW. The Anpara C promoter will have the benefit of common facilities like a coal washer, coal-handling plant, and water reservoir.

Five power distribution companies, all subsidiaries of the state-run power utility UP Power Corporation Limited, will sign escrow account agreements with the power generator and would purchase the entire 1,000 MW generated by the Anpara C plant.

The power companies had asked for government guarantee for the project, a request that was not acceded to. Instead, they were offered "escrow account cover".

On the other hand, the Uttar Pradesh government, anxious to expedite the privatisation of five power distribution companies (discoms), has sought an assistance of Rs 6,000 crore from the Centre for paying the transit finance for the next five years after the private companies take over the discoms.

The five discoms in UP are now the subsidiaries of the UP Power Corporation Ltd (UPPCL).

The total bill of the transit finance is estimated to be Rs 12,000 crore. The state government feels it can pay half the amount, and for the rest it has sought special grants from the Planning Commission.

However, according to the chairman of the UPPCL, Deepak Singhal, the transit finance is likely to be over Rs 17,000 crore in the next five years after the privatisation of the five discoms.

Transit finance is in fact a subsidy to be given to the private power utilities by the UP government for next five years.

This subsidy would cover the losses suffered by the private utility on account of the transmission and distribution losses. T & D losses in UP were as high as over 40 percent.

UPPCL has already floated tenders for the privatization of the five Discoms in November 2004. It has received Request for qualification proposals from eight companies where the Reliance Energy and Tata Power were the front-runners. The RFQ are being processed and list of short listed bidders is likely to be placed soon before the state cabinet.

UPPCL sources the privatization of the five Discoms, would be fait accompali from June 9, next as Indian Electricity Act (amendment) 2003, is all set to be enforced from this date.

As per the amended act, transmission and distribution are to be separated and the UPPCL would be reduced to a mere power transmission company and the five Discoms, would become independent companies and they would buy power from the UP Power trading Company, which was constituted by the state government in May 2004.

Presently the UPPCL is discharging the functions of power trading, distribution and transmission and its CMD is also the chairman of five Discoms.

During last fiscal, the UPPCL supplied power worth Rs 8,300 crore to five Discoms. The net recovery by the five Discoms was close to Rs 5,400 crore thus a cash loss of Rs 3,000 crore. During current fiscal UPPCL is likely to sell power worth Rs 11,000 crore to five Discoms and recovery is likely to be about Rs 7,800 crore.

Power engineers in UP, opposing the privatization of the power sector say extending the facility of transit finance to the private power utility is like nationalising the losses and privatising the profits.

Secretary general of the All India Power engineer's federation Shailendra Dube said, over 12 lakh engineers would go on two strikes from May 31 against the Indian Electricity Act.