Ultra-mega problem

Last week of October, when power ministry closed bids for the 4,000-MW, imported coalbased Krishnapatnam power project, it must have been disappointed to find just three bidders. Coming in the wake of two fairly successful rounds of such ultra mega power project bids, the disappointment must seem more acute.

Yet, the government has no one but itself to blame for the private sector’s waning interest in ultra-mega power projects. The power generation business is still a mug’s game in the country. A distribution utility collects, on an average, just 65 paise for every one rupee of power sold. The rest is never recovered due to transmission losses and theft. “Fact remains that the pace of reforms is wanting and that is directly related to the dismal private sector interest in large generation capacity,” says T.N. Thakur, Chairman and Managing Director, Power Trading Corporation.

The three companies that placed their bids were Reliance Energy, Sterlite, and L&T. The bids are to be opened on November 13. Interestingly, Tata Power, which bagged the 4,000 Mundhra ultra-mega project early this year, chose to stay away. NTPC, the country’s largest power producer, could not sew up its coal supply in time to submit a bid. Says Union Power Secretary, Anil Razdan: “The global coal markets have hardened in the recent past. This has had an adverse impact on the outcome of the tendering process.”

With fuel cost accounting for as much as 50 per cent of the power tariff, the imported coal option is not as attractive as it was a few years ago. Over the last four year coal prices have almost doubled, leading to a 25 per cent increase in generation cost. No doubt, the global coal market conditions have contributed to the poor response to the Krishnapatnam offer. Yet, that is not the primary reason. The main culprit is the tardy pace of reforms in the power sector.