Centre to curb UMPP imports

Noor Mohammad
Wednesday, Jan 20, 2010
Empowered group of ministers (eGoM) has decided to bar ultra mega power projects (UMPP) from sourcing equipment from abroad—a move that would benefit domestic suppliers like Bhel and L&T, but could raise electricity tariffs. Aggressive bidding by Chinese suppliers has whittled down the cost of equipment for UMPPs by 10-12%.

At a meeting here last week, the eGoM, headed by finance minister Pranab Mukherjee, also set up a committee under Planning Commission member Arun Maira to plan for augmenting domestic equipment-manufacturing capacities to offset the import ban, official sources told FE. The committee comprises officials from the ministries of power and heavy industries, as well as finance ministry chief economic advisor Kaushik Basu. It will submit its report in 15 days.

The government has already awarded four UMPPs, entailing investments of over Rs 80,000 crore, and another four are in the pipeline. The UMPP scheme envisages the use of supercritical technology, which could be import intensive in the absence of competitive domestic manufacturers. Apart from public sector Bhel, which already manufactures supercritical plants, L&T, Bharat Forge, JSW and GB Engineering are creating such capacities.

The eGoM decided to tread cautiously on this issue because it is difficult to ascertain what the bidders’ response to the proposed bar on equipment imports would be. Although central utilities NTPC and Damodar Valley Corporation have recently floated a tender for the bulk purchase of indigenously manufactured supercritical equipment, price bids are yet to be submitted.

Sources said the eGoM also approved a coal ministry proposal calling for the relaxation of policy to allow UMPP developers to use surplus coal from captive blocks at other projects. However, it has advised the coal ministry to have the proposal vetted by the law ministry before implementation. The government had earlier given Reliance Power such flexibility as an exceptional case for its Sasan UMPP. This benefit would now be extended to all UMPPs.

The eGoM has decided that no developer can have more than three UMPPs under construction at a time. A developer that has bagged three UMPPs can bid for a fourth only after it has commissioned the entire capacity of at least one project. Further, an interested bidder should meet this condition 30 days ahead of the request for proposal (RFP) initial submission date. This has serious implications for Reliance Power, which has bagged three out of the four UMPPs bid out by the government...