Slow Progress

Of
Ultra Mega Power Projects

Infrastructure & Real Estate Financing

Project Report
Dr. Gireesh C Tripathi

Submitted By
Sanyam Aggarwal (10FN-100)
Srikanth Konduri (10FN-109)
Vaibhav Chaudhary (10FN-116)

Acknowledgement
We wish to express my sincere gratitude to Dr. G.C Tripathi, Professor at IMT Ghaziabad for
providing us an opportunity under his able guidance and for reposing confidence in us and
guiding us. Without his expert opinion, supervision and noble guidance this project would not
have been complete.

Introduction

Development of Ultra Mega Power Projects (UMPPs) has been identified as a thrust area.
These are very large sized projects, approximately 4000 MW each involving an estimated
investment of about Rs. 16,000 crore. These projects will meet the power needs of a number
of States/ distribution companies located in these States, and are being developed on a Build,
Own, and Operate (BOO) basis. Identification of project developer for such a projects are
done on the basis of tariff based competitive bidding. The Power Finance Corporation (PFC),
a PSU under the Ministry of Power, has been identified as the nodal agency for this initiative.

1.1 Salient Features of UMPPs

Following are the salient features of ultra mega power projects
UMPP will lead to capacity addition of 100,000 MW by 2012
Based on idea that development of large scale projects leads to economies of scale
thus producing cheaper power
Will use supercritical technology to achieve higher fuel efficiency and lower carbon
emissions
Dedicated captive coal blocks for pithead projects
Coastal projects to use imported coals

1.2 Bidding Process

Two stage selection process adopted according to provisions of competitive bidding
under Electricity Act, 2003
Stage 1 Request for Qualification (RfQ) documents submitted by bidders are
evaluated to identify eligible bidders
Stage 2 Request for proposal (RfP) invited from qualified bidders
Successful bidder decided on basis of lowest tariff

1.3 Selection Sites for UMPPs

Nine such projects had been identified to be taken up, 4 at pithead and 5 at coastal locations.
The nine sites for the UMPPs identified by the Central Electricity Authority (CEA) in
nsultation with the States are shown in the following table on next page
1.3.1 Criteria for selection of sites

Pit head location with domestic coal,

Coastal location with imported coal,
Coastal location with domestic/blended coal,
Through a preliminary scrutiny by CEA of a number of potential sites identified in the
country.

The table shows the location, state, capacity and project developer for a particular UMPP

Figure 1: Proposed UMPP's in India

From the above mentioned Sasan, Tilaiya, Mundhra and Krishnapatnam were awarded in the
first round of bidding. Mundhra recently became the first UMPP to commission power in
India

Partners in Development

The major partners and stakeholders in development of the project are as follows :
1.
2.
3.
4.
5.
6.

Ministry Of Power
Central Electricity Authority
Power Finance Corporation
States falling under Indian Union
Shell Companies or SPVs
Project Developers

All of the above have work together in order to make these projects successful

2.1 Role - Ministry of Power

Co-ordination with Central ministries/agencies for ensuring
Coal allotment/linkage
Environment/Forest clearances
Water linkage
Required support from state government and agencies
Allocation of power from UMPPs to states
Facilitating PPA and payment security mechanism with state govt. and utilities
Monitoring progress of SPVs

2.2 Roles SPVs

Carrying out activities on behalf of distribution licensees
Acquisition of land for projects
Getting clearance from state govt. or Maritime Board for use of water
Appointment of consultants for Environment Impact Assessment (EIA) and
project report
Appointment of consultants for International Competitive Bidding
Other statutory clearances and approvals

2.3 Roles of other partners

2.3.1 States of India

 Rehabilitation and resettlement plans

Participation through its representatives in various committees and meetings
Ensuring proper payment with distribution agencies
2.3.2 Power Finance Corporation
Responsible for setting up 9 SPVs
2.3.3 Central Electrification Authority
Responsible for identification of potential sites for UMPPs

Challenges for UMPPs

Inspite of best of intentions and active participation by the private sector UMPPs have run
into lots of problems. The problems that are generally encountered are
1.
2.
3.
4.
5.
6.

Non availability of coal for power generation

Problems in getting environment and forest clearances
Protest against displacement of population near the project site
Funding problems
Delay in deciding the location of project
Problem in building consensus on PPA

All the above challenges together or in isolation can hinder the progress of the project and
hence can come in the way of meeting the targets of such projects. Some of the currently
awarded UMPPs have come under scanner due to one of the above problems. We discuss the
details of the problems in this section

3.1 Krishnapatnam UMPP in Andhra Pradesh

3.1.1 Non-availability of coal
Reliance Power had won the Krishnapatnam Ultra Mega Power Project under tariff-based
competitive bidding, quoting a levelised rate of Rs 2.33 per unit (kWh) to supply power to
eleven procurers from four states - Andhra Pradesh, Tamil Nadu, Karnataka and Maharashtra.
Following is the sequence of events that occurred which is threatening to jeopardize the
power from the plant
RPower acquired 3 coal mines in Indonesia to feed this UMPP and bilateral
agreement was reached on coal price of $26/tonne
Later Indonesian law was modified and it required all parties to sell at market
prices i.e. $60/tonne
There was a total requirement of around 15 million tones from the Indonesian
mines
This has caused project cash flow shortage of $500-500 million for RPower and
work has been stalled

 Now Reliance wants to increase the tariff at which power was supposed to be
supplied and pass on the hike to consumers
But while deciding on the Power Purchase Agreement (PPA), increase in fuel
prices was excluded from force majeure provisions. Also non-natural force
majeure events specified doesnt include actions by foreign government
According to government, it cant change power retrospectively as they were
fixed by competitive bidding
3.1.2 Condition of soil
Soil condition is another problem at Krishnapatnam. Even after going 75 metres down,
engineers found marine sand, which is not be a good sign for laying foundation. It has to be
filled with layers, due to which the cost would go up significantly

3.2 Sasan UMPP Madhya Pradesh

Sasan UMPP in Madhya Pradesh has long been the target of Comptroller and Auditor General
(CAG) of India. Coming high on the heels of 2G scam, CAG report on Sasan UMPP is
generating a lot of negative publicity.
Moher, Moher Almari and Chatrasaal coal mines had a total of 760 million tonnes of coal.
These sites had been allotted to Reliance Power as captive coal mines for Sasan UMPP
project. This UMPP requires 400 million tonnes of coal
CAG has accused Reliance Power of diverting the incremental coal for use at Sasan UMPP to
one of its other plants in same state. CAG argues that is is causing loss to the national
exchequer and is providing undue benefit to the company.
Reliance on the other hand had argued that the use of incremental coal had been approved by
the Empowered Group of Ministers (EGoM). Also this benefit from coal mines had been
factored at the time of competitive bidding. It is important to note that power from this
UMPP is going to be supplied at least expensive rate of Rs. 1.19/unit
This one upmanship between CAG and government can dent the investor confidence and
effect other infrastructure projects in the country

3.3 Mundhra UMPP Gujarat

Tata Power's Mundra project, the only Ultra Mega Power Project (UMPP) that is running on
track out of the four awarded so far, encountered possible delays due to problems in the
associated transmission link. Forest clearances and right-of-way issues held up the
transmission line being set up for evacuating power from the project, which resulted in
bottling up of electricity from the initial units of the 4,000-MW power plant.
The sticky issues holding up the line involved a wildlife and forest clearance in one of the
patches, which threatened to hold up the link even if the right of way issues are resolved.
All the above problems delayed the power from the project by around 6 months. Recently in
January 2012 Mundhra started commissioning power.

3.4 Other UMPPs

3.4.1 Sundergarh (Odisha) & Akaltara (Chattisgarh)
The uncertainty over solutions to coal linkages and environmental clearances is affecting two
other UMPPs. The coal blocks allotted to UMPPs in Chattisgarh and Odisha have been
classified as no-go areas Ministry of Environment and Forests. This means that these areas
are not fit for mining and if continued can cause irreparable damage to the environment
This problem of coal linkage caused delay in submitting of request for qualification
document by interested developers

3.4.2 Cheyyur Tamil Nadu

Local agitation regarding the displacement of local population is delaying the filing of RfQ
documents by the developers

Conclusion

The above report gives a brief idea about the status of UMPPs in India. Some of the
advantages and disadvantages of UMPPs are discussed next

4.1

Advantages
Huge power generation capability for power starved nation
Reduces the burden on government due to private sector participation
Use of supercritical technology permit daily start up/shut down facilities along
with faster starting time and load changes leading to efficient power generation
Economical power generation for consumers and industry

4.2 Disadvantages
Land acquisition, environment and forest clearances, rehabilitation of displaced
discourage private partnerships
Heavy water use could cause severe water scarcity and water pollution and
adversely affect the local environment
Greenhouse gas emissions to increase substantially

UMPPs if implemented successfully can be pivotal in changing the face of India. Apart from
use of power generated by UMPPs for industrial purposes, power can also be used for
agricultural and domestic purposes. This will lead to a tremendous increase in productivity of
different sectors of India.

With the awarding of four projects, the UMPP program had a good start in India but some
recent developments have made this initiative a bit uncertain. With many more UMPPs down
the line challenges still exist in this field. Strong political will along with responsible private
sector participation is required to make this program a success

References
1. http://www.wikipedia.org
2. http://www.indianpowermarket.com/
3. http://www.indiainfoline.com/
4. Business Line
5. India Infrastructure