(Online Course) Contemporary Issues for IAS Mains 2012: PIB - Ultra Mega Power Projects

Ultra Mega Power Projects

Ultra Mega Power Projects (UMPP) were launched to meet the growing needs of the economy, achieve power at low tariff, cater the needs of more than one states and to make swift capacity addition. These are very large sized projects, approximately 4000 MW each involving an estimated investment of about $ 4 billion. The projects envisage to substantially reduce power shortages in the country. The Government has accordingly taken the initiative for facilitating the development of a few ultramega power projects capacity each under tariff based competitive bidding route using super critical technology on build, own and operate basis. These projects will meet the power needs of a number of States/distribution companies located in these States, and are being developed on a Build, Own, and Operate (BOO) basis. In view of the fact that promotion of competition is one of the key objectives of the Electricity Act, 2003, and of the legal provisions regarding procurement of electricity by distribution companies, identification of the project developer for these projects is being done on the basis of tariff based competitive bidding. For facilitating the development of these projects, Power Finance Corporation (PFC) has been designated as nodal agency. PFC has to create a project specific
Special Purpose Vehicle (SPV), which in turn will perform the bidding process for the project.

Following are the salient features of this initiative:

• The Ultra Mega Power Projects would use Super Critical Technology with a view to achieve higher levels of fuel efficiency, which results in fuel saving and lower green-house gas emissions.·

• Flexibility in unit size subject to adoption of specified minimum Supercritical parameters.

• Integrated power project with dedicated captive coal blocks for pithead projects.

• Coastal projects to use imported coal. As per the provision of the competitive bidding guidelines issued by Ministry of Power, a two stage selection process has been adopted.

The first stage of bidding involves Request for Qualification (RfQ) containing qualifying criteria for selection of bidders. The RfQ documents submitted by the bidders are evaluated to identify those bidders who will be eligible to participate in the second stage of the process. The second stage of bidding process invites Request for Proposals (RfP) from the qualified bidders. After evaluation of the RfP documents, the successful bidder is identified on the basis of the lowest levellised tariff.

Role of States

From the initial step to the final commissioning of the UMPPs, the role of concerned State Governments is of immense importance. In fact, no major activity can be started without a clear identification of a suitable site by the concerned State Government.Right from site identification, the host State and the other power procuring States are required to continue to play a highly pro-active role. In particular, some of the activities in which the concerned States are required to play a decisive role include finalization of site, land acquisition process, facilitation of studies at site, facilitation of obtaining state level environment and other clearances implementation of the R&R Plan, provide authorization to the PFC/SPV to carry out the bidding process on behalf of the distribution utilities, participate through its representatives in various committees set up for undertaking the competitive bidding process, facilitate signing of the Power Purchase Agreement, ensure proper payment security mechanism with the distribution utilities etc. In fact, itsas the state utilities who enter into contract as per allocation of power. Role of the Power Ministry

The Ministry of Power is playing a crucial role for the development of the UMPPs by coordinating between various concerned Ministries/Agencies of the Central Government, and with various State Governments/Agencies. Some of the key areas requiring the Ministry of Power’s intervention include –

• Coordination with Central Ministries/Agencies for ensuring:o Coal block allotment/ coal linkageo Environment/forest clearanceso Water linkage

• Working out allocation of power to different States from UMPPs in consultation with the States.

• Facilitating PPA and proper payment security mechanism with State Governments/State Utilities.

• Monitoring the progress of the SPVs with respect to predetermined timelines.

Concept of Shell Companies (SPVs) and its Operationalisation

In order to enhance investor confidence, reduce risk perception and get good responses to competitive bidding, it was deemed necessary to create a project specific SPV and get it to tie up necessary inputs and clearances such as provision of site, fuel through captive mining blocks, water and in principle environment and forest clearances. In addition, shell companies would also be responsible for tying up necessary inputs from the likely buyers of power and facilitate tying up of power off-takes from these projects. In short, the preliminary project development activities including tie up of various inputs / clearances are to be carried out by the respective
SPVs. These SPVs, alongwith the various clearances, tie ups, etc. are subsequently transferred to the selected project developer.Some of the main activities undertaken by the SPVs are:–

• Appointment of Consultants to undertake preparation of Project Report, preparation of Rapid Environment Impact Assessment Report and to conduct other studies as required etc.

• To finalise RfQ/ RfP documents in consultation with States / bidders

• To carry out RfQ/ RfP process and award of project

• Acquisition of land for the project as per requirement of bidding guidelines

• Obtaining allocation of Coal blocks for pit-head projects

• Getting clearance regarding allocation of water by the State Govt. for pit-head locations

• Approval for use of sea water from Maritime Board/ other Govt. Agencies for coastal locations

• Obtain/initiate environment and forest, clearances etc. as per requirement of Bidding Guidelines.

• Obtaining geological reports/ other related data from CMPDI for the coal blocks

• Signing of Power Purchase Agreements with Procurers.

Status of Awarded and Upcoming Projects

Four UMPPs namely Sasan in Madhya Pradesh, Mundra in Gujarat, Krishnapatnam in Andhra Pradesh and Tilaiya in Jharkhand have been awarded to the identified developers. A brief details of these projects are given below:Sl.Name of UMPPTypeLevellised Tariff (in Rs. Per kWh)Actual Commissioning PlanImplementation Status1 Mundra, Gujarat Coasta l2.26412th PlanTwo Units are to be commissioned in 11thPlan and rest Units in 12th Plan.2Sasan, Madhya Pradesh Pithead1. 9612th Plan12th Plan3Krishnapatnam, Andhra Pradesh Coasta l2.33312th Plan12th Plan4Tilaiya, JharkhandPithead1.7712th Plan12th Plan These projects are envisaged to fructify in 12th Plan, however, two units each of 800 MW of Mundra UMPP are expected to come up in the 11th Plan. Furthermore, Request for Qualification (RfQ) for two more UMPPs one in Sarguja District of Chhattisgarh and another at Bedabahal in Sundergarh District of Orissa have already been issued. Sites in respect of Tamil Nadu UMPP and Andhra Pradesh Second UMPP have been identified. Efforts are being made to bring them to bidding stage at the earliest. Sites selection processes are on for setting up of more UMPPs in different states like Jharkhand, Orissa, Tamil Nadu and Gujarat etc.

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