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Govt eyes 24 sites for merchant power plants

Government asks the CEA to scout for sites across various states, where merchant power plants with capacities of 500-1000 megawatt can be set up, reports Samiran Saha.

business Updated: Dec 26, 2007 22:30 IST
Samiran Saha

In its effort to achieve a power capacity addition of 78,577 megawatt, the ministry of power had envisaged capacity addition of around 15,000 mega watt by tapping merchant power plants. The government’s plans have, however, come a cropper as it now looking at an entirely new policy for merchant power plants with its earlier policy failing to attract bidders.

Sources in the ministry of power said “the merchant power plant policy has now been put in cold-storage as response from bidders during the road shows organised by the ministry of power in January yielded poor response.”

Government has asked the Central Electricity Authority (CEA) to scout for around 24 sites across various states, where merchant power plants with capacities of 500-1000 megawatt can be set up.

In a merchant power plant, promoters compete for customers and absorb the full market risk. There is no arrangement for power-purchase agreements before the plants are established, as in the case of conventional independent power projects. The risk is carried onto the balance sheet of the promoter, a ministry official said.

“Searching or identifying sites for merchant power plans is not the primary issue. The issue here is that of finding coal linkages and coal blocks for the proposed merchant power plants. These issues remain unaddressed,” the official added.

According to the 11th Plan paper, the government in consultation with the ministry of coal has identified 15 coal blocks with a coal reserves of 3.2 billion tonne for merchant power plants in the country.

“Despite the projected availability of coal, not too many players have shown interest. The government will have to start the process of merchant power plants all over again. It would hold another meeting to sort out the issues posing as impediments for merchant power plants,” the official said.

India is facing a power shortage to the tune of 70,000 megawatt. Had merchant power plants pitched in earlier, a quarter of the shortage could have been reduced. However, with no policy in place yet, capacity addition still looks distant.