The power struggle

Semi Column

During the first eight months of the current fiscal, 9,536 MW of new capacity has been declared commissioned, coming on the back of a record capacity addition of 20,501 MW added last fiscal, thanks largely due to a spirited private sector performance.

A majority of these newly commissioned generation projects do not have power purchase agreements or PPAs in place, something that has now been made a prerequisite to qualify for getting fuel linkages from Coal India Ltd. The condition to release coal linkages only against long-term PPAs is proving to be unrealistic because competitive bidding for signing of these power pacts is not happening as the requisite documents for the exercise are simply not ready.

At a time when the need of the hour is call bids from projects already under construction (termed Case 1 projects), the Ministry of Power is busy preparing bidding documents for site-specific projects (or Case 2 projects) to be built in future, such as the Ultra Mega Power Projects or UMPPs. Added to this is the rampant fuel shortage situation, amply evident from the fact that around 8,000 MW of newly commissioned gas capacity is idling currently and a similar amount of coal capacity too is either idle or operating on partial load, both for want of fuel.

With another 20,000 MW of coal-fired capacity in advanced stages of commissioning over the next few months, the clamour for fuel is only bound to get more desperate. That Coal India Ltd's (CIL) output is trailing the projected demand equation has not helped matters, threatening to further exacerbate the current situation where idle generation capacity co-exists with rampant cuts in power supply to consumers. Plus there is the challenge of reopening PPAs for projects based on coal supplies from abroad such as Tata's Mundra UMPP and Reliance's Krishnapatnam UMPP, where developers now claim the pricing of foreign coal has rendered the project unviable. To top it all, the problem on the distribution side continues to fester, the bailout by the Centre notwithstanding. Till the time states decide to sort out the mess in their respective distribution sides, interventions by the Centre could still fall short of fully restoring the viability of the power sector, easily the biggest drag on India's growth story. For new power minister Jyotiraditya Scindia, it's a stiff task ahead with very little time to spare.

... contd.

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