The government may revive a proposal limiting the number of Ultra Mega Power Projects (UMPPs) awarded per developer.
“We need to give a thought to the desirability and the feasibility to limit the number of UMPPs per bidder,” said Jairam Ramesh, minister of state for commerce and power.
UMPPs are the centre-piece of the government’s attempts to add over 50,000 Mw of power generation capacity through 13 such ultra mega projects that will come up through competitive bidding by private power developers. Much of this is expected to come up over the twelfth Plan starting 2012.
| STATUS CHECK |
| SASAN: Won by Reliance Power. Financial closure expected next month |
| KRISHNAPATNAM: Won by Reliance Power. Financial closure expected in the first quarter |
| of 2009-2010 |
| MUNDRA: Won by Tata Power. Construction under way. Generation expected to start 2011-2012 |
| TILAIYA: To be awarded to Reliance Power by March 31, 2009 |
| * RFQs to be floated for three more UMPPs in the first half of next financial year (2009-2010) — Cheyyur in Tamil Nadu, Munge in Maharashtra and Sundergarh in Orissa |
| * Two other UMPPs to come up in Chhattisgarh and Karnataka |
Ramesh’s statement comes days after Reliance Power emerged as the lowest bidder (at Rs 1.77 per unit) for the 4,000 Mw Tilaiya Ultra Mega Power Project (UMPP) in Jharkhand. With this, Reliance Power has bagged three of the four large power projects that the government has put up for bids so far.
Reliance Power has also bagged the UMPPs in Sasan, Madhya Pradesh and Krishnapatnam in Andhra Pradesh, leaving the industry worrying about the government committing a huge chunk of power capacity to a single developer.
Tata Power won the fourth project, in Mundra, Gujarat.
A proposal to impose a limit was made about a year back but was turned down by an Empowered Group of Ministers (EGoM) in November 2007 in the interests of increasing competition. Instead, the EGoM recommended putting stringent performance guarantee mechanisms in place to ensure companies do not overstretch themselves to bag UMPPs.
Companies bidding for UMPPs are initially required to pay a bid bond of Rs 120 crore, which was to be replaced by a performance guarantee of Rs 300 crore that the successful bidder has to pay.
After the revision of the performance clause by Power Finance Corporation (PFC), the successful bidder has to pay a higher financial guarantee that is 50 per cent higher than the previous amount to become eligible for additional UMPPs.
Accordingly, Reliance Power is expected to pay a financial performance guarantee of Rs 600 crore in a few weeks for bagging its third UMPP at Tilaiya. A questionnaire to Reliance Power remained unanswered.
Power industry analysts, however, feel that restricting the number of UMPPs that a single developer can bag might not hinder competition owing to the fact that the private sector accounts for just 20 to 25 per cent of overall power generation capacity in India.
“Competition restriction is a factor but going by the share of private participation, I do not think we’ve reached that level of competence yet,” said Arvind Mahajan, executive director, KPMG advisory services.
