MUMBAI: Reliance Power on Tuesday terminated its power purchase agreement (PPA) for 3,960 megawatt ultra mega power plant (UMPP) at Tilaiya in Jharkhand citing delay in land acquisition as a prime cause.
Reliance Power had signed the agreement in 2009 and said even after five-and-a-half year it was not allotted any land for the project. The company had held 25 review meetings and extensive follow ups with the state government but since it yielded no concrete results, it had no option but to walk out of the project.
The termination of a project of such size and significance could deal a blow to the government’s affirmations on improving ease of doing business and facilitating infrastructure projects, especially power generation. However, it could also bolster a counter argument on why amendment to the land acquisition bill is required to help industry set up projects quickly.
Ironically, the pull out of Tilaiya comes within a week of the company fully commissioning its 3,960 MW project at Sasan in Madhya Pradesh.
“For any big infrastructure activity to take place, land is the biggest impediment,’’ said Ashok Khurana, director general of the Association of Power Producers.
“Farmers should get adequate compensation but the process needs to be simplified to cut delays, which only increases project costs and impact viability.’’
Earlier Arcelor Mittal and Korean Steel maker Posco had pulled out of steel projects in India because of long delays in acquiring land.
The country is not only power-scarce but is also behind schedule in increasing generating capacity. According to the Standing Committee on Energy, electricity generation target of 17,830 MW and 17,825 MW for the fiscals 2013-14 and 2014-15, respectively, were not achieved. Between April 2014 and February 2015 about 15,935 MW was produced against the target of 17,830 MW. Similarly, during the 2013-14, 17,825 MW was generated against a target of 18,432 MW production.
The company has installed capacity of 5,945 MW from six projects and a capex of Rs 50,000 crore.
The Sasan integrated project including power and coal at a single location involved Rs 27,000 crore investment. All its six units are now running round the clock.
The company has a pipeline of 5,000 mw of power projects in Arunachal Pradesh, Himachal Pradesh, and Uttarakhand. It also plans to develop 6,000 MW of solar power in Rajasthan.
Move Shrinks Future Capex by Rs 36,000 cr
Reliance Power said the termination of PPA reduces its future capex pipeline by Rs 36,000 crore, adding that because of delay in land acquisition the UMPP cannot be completed by 2023-24 at the earliest. Even the forest land in the power station was not handed over, and coal block land acquisition had not started despite application being given in 2009. It needed 17,000 acre of land.