The Hindu Business Line : Power plan

As bidding for two ultra-mega power projects proposed by the Union Power Ministry enters the final stage, two issues stand out: One, foreign companies are still not convinced about the prospects of India's power sector, going by the fact that most of them did not submit bids. Two, it is only through such special efforts as the ultra-mega projects can the private sector's role in power generation be increased. Soon, the successful bidders for the projects at Sasan in Madhya Pradesh and Mundra in Gujarat will be finalised. Leading Indian power developers, including the largest of them all, National Thermal Power Corporation Ltd, and Reliance Energy and Tata Power are in the race for these projects.

After the initial euphoria of the early 1990s, foreign interest in India's power generation sector has waned. Critics of liberalisation often cite Enron's Dabhol power project as an example of all that is wrong in allowing foreign companies to participate in power generation. But there is no reason to tar all companies with the Enron brush. Foreign companies would like to see consistency in policymaking and a sustained offtake of power. Rather than put up 4,000 MW capacity in a single location at one go, which is what the ultra-mega power projects plan seeks to do, serious foreign players would prefer incremental addition to capacity, with assured offtake. Also, all the problems cited in the mid-1990s — poor transmission and distribution infrastructure — have still not been completely addressed and the fear is that these ultra-mega projects will only lead to large evacuation problems.

The first two ultra-mega projects are expected to go on stream by 2012, and the bidding for the others will open in 2007. The Ministry is hoping that the competitive tariff-bidding route will attract more private sector participation in generation; the private sector now accounts for a little over a tenth of the total installed capacity. Unlike in the 1990s, the private sector is now much better placed to raise funds — each of the ultra-mega power projects will require a capital investment of nearly Rs 20,000 crore. Competitively bid projects are the way forward, rather than the Memorandum of Understanding route, which gave the private sector a bad name and compounded their problems. Yet given the patchy track record of the private sector, it appears that public sector units and State utilities will need to weigh in with several new projects if the national electricity generation capacity of about 120,000 MW is to expand to 200,000 MW by 2012.