The Power Finance Corp. (PFC), India’s nodal agency that conducts bidding for 16 proposed Ultra-Mega Power Plants (UMPPs)—coal projects of a 4,000-MW scale to make power available at a minimum cost—in October withdrew a key tender inviting preliminary bids for the Surguja project in the country’s central state of Chhattisgarh.
Though no official information about the withdrawal was made, Indian media reported the process for invitation of initial bids has suffered repeated delays because coal blocks for the project are located in dense forest area, which the Ministry of Environment and Forest have warned may cause environmental damage if mined. The PFC in October, however, issued requests for qualification for Odisha and Tamil Nadu UMPPs, projects that could be awarded in February 2014.
India in 2005 proposed 16 UMPPs in various states, including Andhra Pradesh, Chhattisgarh, Gujarat, Jharkhand, Karnataka, Madhya Pradesh, Maharashtra, Odisha, and Tamil Nadu. Only four projects have so far been awarded. The first of those projects, Tata Power’s Mundra UMPP (a POWER 2013 Top Plant) fully went live in March 2013, but its developer has been hemorrhaging financially after new rules rendered coal contracts between Tata Power and Indonesian producers invalid. The change forced the company to procure imported coal at an unprecedented cost that increased 150% to 200% from the start of the bid process.
Power sector investors have since expressed emphatic concerns about fuel risks in coal-short India. To keep investors interested in the build, own, and operate projects that the government says are integral to reducing the nation’s power demand-supply chasm (Figure 4), India’s power ministry in October announced it had relaxed bidding norms by halving capital cost requirements to qualify for setting up UMPPs from 10% of the overall project cost to 5%. It also said it would consider costs incurred by companies on projects that span seven years, rather than five years, as previous bids required.
Coal supply was assured for the Odisha UMPP, the government said, and land and water clearances had already been secured for both the Odisha and Tamil Nadu projects.
—Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)