Post Dabhol issue, there was not much investment in the power sector from the foreign investors unlike the oil sector which draws attention from foreign like Cairns etc. Power business is certainly a profitable venture considering the huge demand supply gap in India which is predicted to be continued for another 25 years. Still the sector has not drawn foreign Independent Power Producers (IPPs). The reason for this is the various risks, mostly political risks associated with setting up a power project.
Now, Government is taking some steps to boost the sector through its initiative of setting up of Ultra Mega Power Projects (UMPPs). Now UMPPs are seeing bidding from major Indian power producers but not yet from a foreign IPP. Though lot of foreign capital is coming into the sector indirectly through FII but no player has come directly to invest into the sector.
These UMPPs are going to play that crucial role which can make or break India’s image for future investment in power sector. If the successful bidders, Tata Power, Reliance Energy as of now can run the UMPPs successfully then the future scenario of power sector will be very positive.
Government should take care that these UMPPs should fulfil all the objectives for which they are planned to be created.
The latest row happening of AP govt complaining of no development on Krishnapatnam UMPP. Even Sasan and Tilaiya UMPPs are also facing delays. Earlier, Issues like Reliance Power selling excess coal allotted in Sasan and Tilaiya UMPP and Tata Power filing a case against Government for giving preferential treatment to RPower have cropped up which is not good for the sector. The tariff based competitive bidding is a very transparent process and that should not be diluted by these kinds of allegations. Ideally the excess coal should be given to Coal India’s account. Giving the excess coal to Reliance Power has changed the whole economics of the tariff quotation. Reliance had quoted very low tariffs for the Sasan and Tiliaya UMPPs. The permission to utilize the excess coal in its other projects has given an advantageous position.
It is very necessary for the Government to take extreme precautions while handling UMPP related decisions. As many as 16 UMPPs are planned to be set up which amounts to 64000MW with an investment of Rs320000Cr. The whole world is having its eyes on it. Mishandling with it will create another Post Dabhol years where we failed in significant capacity additions.
Successful completion of bid of UMPPs is a small step, the major job of Government lies ahead when it has to monitor the successful implementation of the projects in a transparent way so that all the stakeholders i.e. IPP, consumers, all concerned utilities and the Government himself gets benefitted thereby attracting global power producers.
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