Current Status of Ultra Mega Power Projects in India

The coal fired Ultra Mega Power Projects were envisioned by the UPA Government under the “Power for all” vision of the 11th plan documents.

Initially 16 UMPPs each with a capacity of about 4000 MW were identified in various parts of the Country. Out of them, four projects viz. Sasan in Madhya Pradesh (Reliance Power), Mundra in Gujarat (Tata Power), Krishnapatnam in Andhra Pradesh (Reliance Power) and Tilaiya in Jharkhand (Reliance Power) were awarded to developers respectively. Only two viz. Sasan and Mundra are in operation. From Tilaiya UMPP, Reliance has quit citing inordinate delays. Krishnapatnam is also deferred so far. Rest are either deferred or their status is unknown.

UMPP Key Features

UMPP are launched by Ministry of Power in association with Central Electricity Authority and Power Finance Corporation. They are awarded to developers on the basis of tariff based competitive bidding. They are not wholly owned by Government.  They have minimum capacity of 4000MW and they are ONLY coal based power projects.[currentuser_id]

The government had invited bids for two more UMPPs at Bedabahal in Odisha and Cheyyur in Tamil Nadu in 2015 but their bids were cancelled due to poor response.

What went wrong?

The UMPPs have several problems. Firstly, there is issue of land acquisition. For such projects, the work of acquisition of land is done by the Government. Land acquisition is a big issue everywhere in the country and particularly in naxal areas, it’s very difficult. Tilaiyya power plant of Jharkhand is in such area and has faced inordinate delays. Secondly, administrative delays have several financial overheads. Mostly, the infrastructure projects are financed via debt and any delay will reduce the viability of projects due to increasing interest burden. Further, since UMPPs were awarded via competitive bidding, any delay will further cause lower internal rate of returns (IRR). Thirdly, coal supply to such plants is a big issue. Coal for these plants was supposed to be imported or  used from local/ captive mines. Out of the two functional UMPPs, Mundra UMPP of Tata Power is using imported coal while Sasan is using local coal. The Indian coal has low calorific value, high silica content and high ash content, which increases the capital expenditure of such plants, as they need to invest more in advanced equipments. Fourthly, the developers need to sell the electricity to State Electricity Boards (SEBs), which don’t have good payment records. The state bodies are already suffering due to their AT&C losses. Fifthly, there was an absence of clarity on coal price and power-purchase agreements. UMPPs works on Design, Build, Finance, Operate, and Transfer (DBFOT) model. The power producers say that this model does not address all the risks associated with the projects because all losses go to the power generator, before he transfers the project.

Current Status:

Due to lack of enthusiasm among the private players, the government has decided to come up with a new standard bid document, which would address the issues related coal price pass-through and power-purchase agreements.