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Powerful Tomorrow

Business

‘Power’ful tomorrow

While the government remains committed to meet the 11th Five Year Plan’s target, private players too are gearing up to the opportunities and challenges in the power sector. By Niranjan Mudholkar

While dedicating Torrent Group’s Sujen Mega Power Project at Surat in Gujarat recently, the Union Minister of Power Sushil Kumar Shinde said that the power sector will have to exceed the rate of economic growth in order to bring prosperity to the nation. He said this would be possible only if the Central Government, the state governments and the private sector work together towards the same goal.
Incidentally, the Sujen Mega Power Project marks a milestone involvement by private players in the power sector. In fact, even the Power Minister said that the 1147.5MW gas based project signifies the direction the Indian power sector will have to take in the near future to overcome the electricity shortage that threatens to restrict our economic progress. India today faces a double edged sword on the power front – huge deficit and rising demand.
The country’s deficit card shows a peaking shortage of electricity of nearly 12% and an energy shortage of 9-10%. The sector is currently striving very hard to meet the large scale capacity addition programmes – 78,000 MW in the 11th Five Year Plan and about 1,00,000 MW in the 12th Five Year Plan. While the targets are very challenging, they have also opened up new opportunities.

SPML’s foray
“The vision of ‘power for all’ has driven our company’s operations towards power sector. Power is one of the sectors in India with a high growth rate. Power is a crucial requirement for a developing nation like India with an increasing per capita consumption rate. But increasing power generation is possible only with the right infrastructure,” says Subhash Sethi, vice chairman, Subhash Projects & Marketing Ltd (SPML).
With an experience of more than 400 successful projects across the infrastructure domain, it was only a matter of time before SPML entered the power sector. Its foray was greeted by success in the signature Kabini Mini-Hydel Power Plant in Karnataka.
Overcoming enormous geological challenges, the project was completed in a record 20-month time frame. Today it is an eco–friendly, nonpolluting project that taps into the huge water potential of the Kabini river. “Our presence in the sector has been end-to-end right from our proven capabilities in numerous EPC power projects – Transmission lines/substations – rural electrification to being a preferred partner as a Balance of Plant solutions provider for Thermal Power Plants to power generation projects on the PPP/BOOT basis,” adds Sethi.
SPML is involved in several projects across India either as an EPC contractor or as a developer of mini-hydel power projects. These include the Raw Water Make up System from Panchet Dam Reservoir to Santhaldih Thermal Power Station under WBPDCL (3×250 MW), main plant civil works & offsite civil works package for Bongaigaon Thermal Power Plant (3×250 MW) for NTPC and other prestigious Balance of Plant projects for Korba Super Thermal Power Project Stage III (1×500 MW), ash water recirculation system package for Barh Super Thermal Power Project (3×660 MW), station piping package for Simhadri Super Thermal Power Project – Stage II (2×500 MW), circulating water System and fire protection system for Neyveli Thermal Power Station-II Expansion amongst others.
Besides the existing hydro-electric plants under operation, SPML is in the process of developing and constructing small Hydro Power projects up to 200 MW capacity in of Karnataka, Himachal Pradesh, Uttarakhand, Bihar and other north eastern states.
SPML recently also won the prestigious station piping package for Simhadri Super Thermal Power Project at Vishakapatnam, Andhra Pradesh, worth Rs. 105 crore from the National Thermal Power Corporation (NTPC).

IEPL’s foray
Another company that has recently ventured in the power sector is Ideal Energy Projects Ltd (IEPL). Jayant Mhaiskar, CMD, IEPL feels that the power sector has registered significant progress since the implementation of the regulations and the process of planned development of the economy.
Mhaiskar adds that power development is the key to economic development, and infrastructure growth remains the overriding priority for India with the power sector playing a pivotal role. “The Electricity Act 2003 allows the sector to align with market dynamics and clears the roadblocks especially for greater participation by the private sector,” he says.
Mhaiskar also mention the independent regulatory framework that now provides business confidence to power companies and a fairly lucrative rate of return on equity of 13-14% per annum. “The policy of liberalisation helps the coal based thermal power project to a great extent,” he adds.
Sethi of SPML agrees. He says: “The government has been instrumental in formulating policies that are aimed at encouraging investment in the sector and increasing the competition.”
IEPL is coming up with the 1×270 MW Coal Based Power Project near village Bela, tehsil Umrer, District Nagpur (Maharashtra). Proposed date of commissioning is November 2011. IEPL has obtained all the necessary approvals such as environment clearance, land, aviation clearance. Evacuation arrangements have also been made. The key componenst of water, coal and fuel are also tied up. The company has already started the ground work for the 2nd phase of 1×270 MW, and while finalising the layout of the first plant the same has been considered.

GMR Group’s foray
Infrastructure major GMR Group was an early entrant in the Indian power sector after the sector was liberalised. The Group – through GMR Energy – is implementing two mega thermal projects – a 1050 MW in Orissa and 1200 MW in Chhattisgarh. It also has five hydro projects under development with a cumulative capacity of 1500 MW.
In addition, GMR has three operating plants with a total capacity exceeding 800 MW. These include a 200 MW – the world’s largest diesel power plant in Chennai, the first Independent Power Producer (IPP) in Tamil Nadu; a 220 MW – world’s largest Barge Mounted Power Plant in Karnataka and a 370 MW – Gas Based Power Project at Vemagiri in Andhra Pradesh.
About two months back (in July 2009), GMR Energy acquired 100% ownership interest in Emco Energy Ltd, (a subsidiary of Emco Ltd), a public ltd company. Emco Energy Ltd is developing a 600 MW coal based power plant, in two phases (of 300 MW capacity each), in the Warora Taluka, District Chandrapur in the state of Maharashtra. With this, GMR now enjoys a pan-India presence.
GMR has also acquired a 50% stake in the global power generation company InterGen NV, marking its foray into the global energy sector.

The challenges
Mhaiskar of IEPL says: “In spite of positive changes made in the policy to accommodate the private sector into the Power generation by the regulatory authorities, the coal requirement and coal linkage is still the challenge for many private players who intend to enter into the Power sector.”
It is important to note that recently the Indian Chamber of Commerce (ICC) has cautioned against giving coal linkages to port based power plants saying it will deepen the coal crisis.
A new policy under consideration implies that a number of Port based Independent Power Plants (IPPs) that are meant to be coming up based on 100% imported coal will be eligible to secure linkage or captive coal block to the extent of 70% of their total requirement. The proposed recommendation of CEA – says ICC – will only aggravate the shortage of coal for IPPs which are coming up entirely based on domestic coal supplies through linkage or captive coal blocks.
Most of India’s coal deposits are located in the eastern states of West Bengal, Orissa, Chhattisgarh and Jharkhand. Whereas most of the Port based Independent Power Plants are coming up on the Southern and Western coasts of India. ICC strongly recommends that all the port based Power Plants which are meant to be dependent on 100% imported coal must not be given any linkage or Captive Coal Blocks in India and they must continue to be dependent on 100% imported coal.
Sethi draws attention to the transmission and distribution leakages and losses in the sector. “These need to be minimised and eliminated by using integrated solutions.
Government should encourage the use of efficient and top end technology for the same,” he says. Sethi further adds that the government can play a strong role in promoting companies that have the domain expertise to lead and expedite projects and provide seamless opportunities for investments in projects.

The way ahead
(While this article primarily focuses on conventional power plants, it acknowledges the significance of renewable power sources (wind & solar) and nuclear power plants. These will play an increasingly critical role in India’s quest for power. Renewable power sources will be particularly important from the climate change perspective and have opened up tremendous opportunities. We will discuss these issues in a separate article.)
Mhaiskar feels the government should continue to make the power sector conducive for private players. He feels that the current tax holiday (having a sunset clause up to March 2011) should be extended. “Currently all the UMPP’s are enjoying tax incentives on procurement of the plants and the same also should be extended to the smaller plants,” he says.
He also points out that the Indian Energy Exchange (India’s 1st Power Exchange) has made significant presence in the field of Merchant power and it will have very crucial role for regulatory intervention in traded power.
As Sethi of SPML says, power lights up people’s lives and helps them on the way to their dreams. It fuels a whole nation’s growth aspirations. It is without doubt the engine of growth for the Indian economy. And all stakeholders – public and private – will have to work together to make this engine run faster, better and stronger.

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