US report advises Tamilnadu to dump Cheyyur power project

Stating that the issue was grid transmission and distribution losses, the IEEFA study suggested that the state focus on eliminating them

Published: 04th August 2016 06:53 AM  |   Last Updated: 04th August 2016 07:08 AM   |  A+A-

CHENNAI: The 4000 MW coal-fired Cheyyur Ultra Mega Power Project (UMPP) would be a financial disaster for the consumers, the Tamil Nadu Generation and Distribution Corporation Ltd (TANGEDCO) and the State government, said a report by the US-based Institute of Energy Economics and Financial Analysis (IEEFA). It suggested that Tamil Nadu abandon the Cheyyur project and focus on eliminating the transmission and distribution losses.

It said the issue was not the availability of power generating capacity, but the grid transmission and distribution losses. For the year 2014-15, the Aggregate Technical and Commercial (AT&C) losses were 24.4% which was much higher than the global grid average (6-8%).

“Loss incurred in transmission and distribution of electricity is one of the important factors of TANGEDCO’s indebtedness,” said Jai Sharda, a financial analyst at IEEFA, and one of the authors of the report. He was speaking at a media meet on Wednesday in which activists fighting against the project also took part.

Till 2015, TANGEDCO had accumulated losses of `65,000 crores and 11% of the Reserve Bank of India’s (RBI) non-performing assets (NPA) was with the power sector, said Nityanand Jayaraman, an environmentalist.

According to the report, India’s overall power deficit had fallen from 3.3% in 2014 to 1.2% in 2016 and Tamil Nadu would not face power deficit for the next three to four years.

“Tamil Nadu is set to become power surplus and has no need for such a massive baseload capacity enhancement,” said the author Sharda.

The report estimated that power from the Cheyyur plant would cost `5.93 a unit which was higher than the average per unit cost of power generated from the solar power plant (`4.01). “With Tamil Nadu’s indebtedness, TANGEDCO’s financial situation and giving free electricity, the project’s expensive electricity would worsen the State’s financial situation,” said Nityanand.

Moreover, the Ministry of Power dismissed its bidding process in early 2015 after private companies pulled out citing the unfavorable bidding rules and their inability to get bank funds. But according to the report, the revised bidding guidelines still had many ambiguities, including the land acquisition.

“Apart from land acquisition, the fuel-cost pass-through would expose consumers and the electricity board to tariff volatility and further increase in coal cess would add to this volatility,” Jai Sharda said.

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