Bihar may be power starved yet it may not see any of the proposed power plants fructify in the near future. Progress on the various thermal power project proposals have been stymied for quite some time for want of long term coal linkages, without which financial closure would not be possible and also other statutory clearances would also have to wait. Now, it looks like this wait is all set to get longer. The reason for this has been the policy framed by the union power ministry in regards to prioritize projects for granting of long term coal linkages. (ref: http://powermin.nic.in/JSP_SERVLETS/internal.jsp) The policy states the following

"(i) Projects proposed to be executed by Central Public Sector Undertakings / organizations and state public sector organizations (namely, generating companies, Electricity Boards etc) may be accorded the first priority. Within this group expansion projects will have higher priority in view of their shorter gestation.

(ii) Joint Venture projects, namely, joint venture between Central Sector and State Sector or between the two states, or Central/State with private sector with substantial say in the matter of management of the Joint Venture by the public sector, may be accorded next priority.

(iii) IPP projects, which have been allowed tariff approval by the appropriate tariff commission under Section 62 of the Electricity Act, 2003.

(iv) Projects being developed on the basis of competitive bidding for tariff under Section 63 of the Electricity Act. This would include Ultra Mega Projects and projects being developed on similar lines by the distribution companies/State Electricity Boards or agencies authorized by them to be the Nodal Agency for development of such projects.

(v) Expansion of existing IPP plants which are already supplying power to the grid as per tariff policy and captive power plants supplying at least 25% of their capacity to the grid.

(vi) Other captive power plants.

(vii) Merchant Power Plants.

(a) Linkage to the plant upto a capacity of 1,000 MW; and

(b) Captive coal block allotment for plants in the range of 500 – 1000 MW capacity.

(viii) Any other category not covered above."

Additionally, ministry of coal has stipulated the following conditionality in its note circulated for the SLC (LT) meeting scheduled for Wednesday in the coming week (22/10/2008) (ref: http://coal.nic.in/provcoalstat0708.pdf).

"Item No 6. Consideration of applications of power sector for long-term coal linkages/LOA.

Having regard to the existing commitments, projected production plan in short term, logistic constraints and other relevant facts, it has been considered appropriate to consider on priority certain power projects which are due for commissioning/COD during 11th plan period over projects which are likely to come over later. These cases would be considered subsequently after re-assessing the present level of commitment and revised projected availability as well as other relevant factors in accordance with provisions under NCDP. Ministry of power has furnished apriority list of power projects vide letter No. FU-16/2008-IPC dated 30th September, 2008 for linkage/tapering linkage."

These developments will have some serious bearing for thermal power projects planned by state administration for expeditious completion. Following are the power projects proposed to the SLC (LT) for coal linkages:
"1. Nabinagar TPS, BSEB (4000 MW)
2. Katihar TPS, BSEB (2000 MW)
3. Pirpainti TPS, BSEB (4000 MW)
4. Muzaffarpur (Extn) (750 MW)
5. Barauni (Extn), BSEB (500 MW)
6. New Nabinagar STPP (NTPC Bihar JV) (2x660 MW)" (, or is it 3x660 MW?)
(ref: http://coal.nic.in/tpp280208.pdf)

If these projects are examined in light of the aforesaid policy guidelines, as issued by power ministry and also as stated by coal ministry in the circulated agenda terms, it is quite unlikely that any of the projects will get an immediate approval for coal linkage. Reason being that hardly any of the projects mentioned above is ready for immediate tendering as would be required for commissioning in the 11th plan period. However, in a best case scenario, it could still be possible that extension projects might be considered for coal linkages. If state is more fortunate then only the New Nabinagar STPP may be considered for linkage. It would be a bit of solace if state were to get coal linkages for even these three projects approved.

Going by the priority prescribed, the ambitious projects like Nabinagar TPS, Katihar TPS and Pirpainti TPS may not happen anytime soon as is evident from the clause (iv), pertaining to projects which are based on tariff based competitive bidding. Notwithstanding the urgency demonstrated by the project consultants IL&FS, and statements issued by state energy department from time to time, these projects will have to wait for quite longer period as next SLC (LT) would be a long time away. Only hope in expediting these projects would be some serious and timely intervention at the highest political level. Does anyone listen?

-------------------------------------------------------

*A Financial Sector Professional with over 11 years of experience in various streams like Investment Banking, Financial Services and Debt Market Operations.

Comment