The government is against encouraging captive power projects on a long-term basis, power minister R Kumaramangalam said yesterday.
Speaking at a conference on captive power units organised by the Independent Power Producers Association of India here, the minister said captive power projects were uneconomical and could at best be used for short-term purposes.
Captive power projects result in inefficiency in the power system by supplying power at a very high cost, the minister said, adding, it was economical to set up large projects as economies of scale could be reaped from them.
Stating that captive power plants would be effective only during the sectors transition period, Kumaramangalam said, larger the power plant, cheaper the cost and vice-versa.
The minister blamed the complicated tariff notification for the high cost of power presently being contracted. This has helped promoters of power projects to add costs to the tariff resulting in the stiff tariff that some promoters including those of fast track projects have contracted, the minister stated.
He said the memorandum of understanding route being followed by the government has only resulted in long drawn negotiations and delays.
Kumaramangalam said fast track projects would not get a counter-guarantee if they continue to raise objections.
Referring to the high cost of power that had been contracted by fast track projects, the minister said only a tariff-based competitive bidding route could ensure cheap and effective power.
