SASAN UMPP Sasan UMPP reduces cost of power to states

THE ultra mega power plants (UMPPs) may have faced several problems that resulted in only a couple of them being operational, but some states have begun reaping the benefits of these large-capacity (4,000 MW) units in the form of cheaper power.

For instance, Madhya Pradesh now sources 1,485 MW from Reliance Power-owned Sasan UMPP at `1.71/unit, compared to the average cost of `3.17/unit for its entire energy consumption.

Sources said the state would save `1,629 crore annually and `40,727 crore for the term of the power purchase agreement. The state procures nearly a fifth of its peak requirement of 8,000 MW from the UMPP.

While MP procures the largest chunk (37.5%) of cheap power from the Sasan UMPP by virtue of the plant being situated in the state, other beneficiaries include Delhi, Rajasthan, Haryana, Punjab, Uttarakhand and Uttar Pradesh.

Despite the apparent benefits of UMPPs, the road for development of these power plants hasn’t been easy. The government has only awarded four UMPPs so far as against 16 that were envisaged. Among the operational UMPPs, Tata Power's imported coal-based plant in Mundra, Gujarat, has suffered losses since its inception due to unforeseen rise in Indonesian coal prices. According to Tata Power, the plant alone has eroded the net worth of the company by nearly `4,000 crore.

Additionally, two other UMPPs awarded to Reliance Power have failed to take off due to reasons varying from failure to acquire land to increased cost of imported fuel. While the company relinquished Tilaiya UMPP in Jharkhand last year, the Andhra Pradesh UMPP has not witnessed any progress either.

In 2014, the development of UMPPs faced another setback after all private developers exited the pre-bidding process citing unfavourable bidding conditions that allowed little flexibility for developers. Private developers argued that for a project that required an investment of `25,00030,000 crore, the companies needed security in terms of fuel cost pass through, easier exit clause and ownership of land, to secure finances from the lenders at a cheaper rate.

Subsequently, the government appointed a committee to suggest changes in the bidding norms. As reported by FE earlier, the government has accepted crucial amendments and will bring the new norms before the Cabinet for approval.

Thereafter, the government is likely to float tenders for UMPPs in Banka in Bihar, Tilaiya in Jharkhand, Beda bahal in Odisha, Deogarh in Jharkhand and Surguja in Chhattisgarh.