REL may pay for Hirma upgrade

Even as Reliance Energy has expressed an interest in scaling up production at its Hirma Power Project in Orissa to 12,000 Mw from the proposed level of 3,960 Mw, the company may have to compensate the state for higher coal usage and associated costs of pollution.

The compensation could be in the form of free power given to the state, a cess on the power sold by the plant outside the state or a share of the consumption duty in the state that buys the power.

In a presentation made recently to the state government, the company mentioned its plans to develop the Rs 48,000-crore project and to scale up its capacity to 12,000 Mw in stages. Reliance Energy has also made a presentation on the project to the Investment Commission headed by Tata Sons Chairman Ratan Tata.

"The issue of compensation has not been discussed with the state government yet," said a company executive. The Orissa government is, however, expected to come up with a position paper on compensation from thermal power plants shortly.

"Power plants create negative assets like ash ponds and air pollution. In addition, the technology employed in thermal power plants does not generate significant employment for the state," said a state government official, adding that power surplus states with coal mines needed incentives to allow more power plants to come up. Coal royalty is very low, the official added.

Unless the project generated a revenue stream for the state, which could be used for development, it would not be of interest to the state, the official added. The Orissa government has proposed that thermal power plants be also required to supply 12 per cent free power to states.

Hirma was among the first mega-power projects planned for construction. It was envisaged as a 6 x 660 Mw project and was initially to be developed jointly by Southern Energy Asia-Pacific Ltd, a US-based company, and the Reliance Group of Industries.

Coal for the project was to be sourced from the Ib valley coalfields and the power generated was to be sold to Gujarat, Rajasthan, Haryana, Punjab and Madhya Pradesh.