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Rediff.com  » Business » Tata Power, Essar Power, L&T opt out of Tilaiya

Tata Power, Essar Power, L&T opt out of Tilaiya

December 30, 2008 12:32 IST
Four companies, including India's largest private sector electricity generator Tata Power and infrastructure major Larsen & Toubro Ltd, chose not to bid for the Rs 16,000-crore ultra mega power project (UMPP) in Tilaiya in Jharkhand even as Reliance Power, Lanco Infratech and NTPC Ltd, the country's largest power producer, submitted their technical bids.

Jindal Steel and Power Ltd and Sterlite Industries were the other two firms which bid after buying request for proposal documents in May this year. A total of nine companies had bought these bid documents.

Essar Power, part of the telecom-to-oil Essar group, and Citra Thermal Power and Infrastructure Ltd had bought bid documents but did not bid.

"If everything would have been normal (referring to the current financial turmoil), we could have more bidders. But under the circumstances, five bids placed for the project is in itself an achievement," said Jairam Ramesh, minister of state for power. "The project is expected to be awarded in a month's time from now," Ramesh added.

The financial bids, indicating the tariffs at which electricity from the 4,000-Mw Tilaiya project would be sold, are expected to be opened in a fortnight, after which the project would be awarded to the company that offers to sell power at the lowest price. The technical bids, in which the bidder mentions his technical capabilities for implementing such a project, were opened today. 

Experts say five companies bidding for the mega project in the middle of a financial turmoil is a healthy sign. "Five bids received for a multi-crore project like Tilaiya out of nine is a good response keeping in view the current economic situation," said a senior official from Power Finance Corporation (PFC), the nodal agency for implementing the UMPPs.

Three companies had bid for the last UMPP offered at Krishnapatnam in Andhra Pradesh.

Essar Power, one of the four companies which had bought the bid documents but did not submit a bid, said its current capacity under implementation was large enough for the time being. "We will take up only that much (project capacity) which we can execute. We are too tied-up in other projects," said a senior official from Essar Power.

The bids for the Tilaiya project come at a time when a financial crisis is making it difficult for companies to get loans from banks to fund projects. The credit crunch has also driven up interest rates to 14 per cent - 15 per cent from around 11 per cent - 12 per cent a year ago. 

The government is, however, planning to ease the lending norms for banks and financial institutions so that they can provide funds for the UMPPs. Demand for electricity in India is growing at around 10 per cent every year, but generation continues to be less than demand.

For the Tilaiya project, experts estimate companies to bid between a range of Rs 1.19 and Rs 2 per unit of power sold.

Tilaiya will be the fourth UMPP to come up in the country under the public-private partnership route through tariff-based competitive bidding. Reliance Power has bagged two of these UMPPs, at Sasan in Madhya Pradesh and Krishnapatnam in Andhra Pradesh, while Tata Power bagged the Mundra UMPP in Gujarat.

The project is a part of the government's UMPP scheme under which it proposes to set up 13 UMPPs to increase India's power capacity by above 50,000 Mw by the end of 2017 in order to fill the electricity demand and supply gap in the country. India has envisaged a capacity addition of 100,000 Mw by 2012 and the achievement of this target requires the development of large power projects like UMPPs.

BS Reporter in New Delhi
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