Bharat Rakshak

NEW DELHI: Facing problems with Chinese power equipments, state owned Durgapur Projects Limited is believed to have approached BHEL for carrying out repair and recommission the 300 MW thermal power plant in West Bengal.

Chinese firm Dong Fang had supplied turbine to DPL, which has become inoperable due to some technical snag since nearly last three months, sources in the know said.

When contacted, Li Qi, CEO of Dong Fang (India), said, "Two months ago we were informed by DPL that some snag has developed in the equipment... We completed this project one year ago and transferred it to DPL."

Meanwhile, BHEL sources confirmed that DPL has contacted them to put the unit back on stream. In view of the Chinese technology, BHEL will have to resort to reverse engineering to gauge the extent of the problem before offering solutions.

DPL's maintenance contract with Dong Fang has also lapsed and the Chinese firm is believed to have said that turbine may have to be taken back to their factory in China for carrying out necessary repair, which may take a long time besides additional cost.
Keeping in mind such incidents, Central Electricity Authority (CEA) has recently issued guidelines saying power equipments suppliers must have manufacturing facility in India, so that any technical snag could be repaired without losing any time.

...Even so, the industry consensus rejects thoughts of an imminent shortage, or “peak coal. Milton Catelin of the World Coal Institute, the international producers’ trade body, admits that he does not understand what has led to the reductions in quoted figures for reserves, but insists that it is not down to a lack of coal. “With regard to coal the world is not resource limited,” he says. “It’s limited only by the economics of recovery and environmental concerns.”

The industry position is born of the traditional view that “reserves” is essentially an economic concept – the amount of coal that could be produced at today’s prices using existing technology. This is not the same as “resources” – the total amount of coal that exists. Seen in this light reserves are, to some extent, replenishable. If shortage bites and prices rise, uneconomic resources – seams that are too thin, too deep or too remote from markets – become economic and can be reclassified as reserves. And because global resources are vastly greater than global reserves, the industry argues there can be no imminent shortage. “It’s there if the price is high enough,” Brewer says. “It’s all a matter of price.”

Problem is, the real world seems to have forgotten this piece of economic lore. Although the price of coal has quintupled since 2002, reserves have still fallen. This is similar to what is happening with oil, where fresh reserves have not been forthcoming despite soaring prices. To a growing number of oil industry commentators this is because we have reached, or are just about to reach, peak oil – the point at which oil production hits an all time high then goes into terminal decline.

Some experts are starting to reach a similar conclusion about coal. “Normally when prices go up, mine managers ramp up production as fast as possible and shortage quickly turns to glut,” says coal geologist Graham Chapman of the consultancy Energy Edge in Richmond, Surrey, UK. “This time it hasn’t happened.”

David Rutledge, chair of Engineering and Applied Science at the California Institute of Technology, shares this view. He became interested in coal after attending a presentation on climate change at which the levels of carbon emissions from fossil fuels were thought too uncertain to be specified. Although the issue was not strictly on his patch, Caltech has a healthy interdisciplinary tradition and early in 2007 Rutledge decided to have a go at solving the uncertainty. The results are even more dramatic than those of Energy Watch.

To forecast coal production Rutledge borrowed a statistical technique developed for oil forecasting known as Hubbert linearisation. M. King Hubbert, after whom the method is named, was a the Shell geologist who founded the peak oil school of thought. In 1956 Hubbert famously predicted that US oil production would peak within 15 years and go into terminal decline. He was vindicated in 1970.

Although accurate, Hubbert’s original forecast depended on the idea that oil peaks when half has been consumed, and half is still underground. So the date of the peak can only be predicted if you have a reasonably accurate estimate of the total oil that will ever be produced. Such estimates can be unreliable – and are worse in the case of coal. Hubbert linearisation, published in 1982, solves this problem by presenting the numbers in a different way.

Linearisation works by plotting annual production as a percentage of total production up to that point (on the vertical axis), against total production on the horizontal axis. This produces a graph showing how the percentage growth rate of total production changes as the resource is extracted (see graphs below). For oil, this percentage generally declines from almost the earliest days of production, even when annual output is still rising, and soon settles into a roughly straight downward-sloping line. By extending the line to the bottom of the graph, you can deduce the total amount that will ever be produced. “Once you have a straight line,” says Rutledge, “you’re off to the races.”

He concludes that the industry has already produced most of the easily mined coal and “from now on it’s going to be a significant challenge”. In China, for example, much of the remaining coal is more than 1000 metres below the surface, Chapman says, while in South Africa the geology is extremely complex. Elsewhere, flooding and subsidence may have “sterilised” significant reserves: the coal is there, but will almost certainly never be mined. As a result, Chapman agrees that true reserves are probably much lower than the official figure.


To test the linearisation technique for coal, Rutledge applied it to historical data for UK production, which peaked in 1913. He says it provides a better model of the decline since then than traditional economics, which tends to blame factors such as foreign competition and Winston Churchill’s decision to switch the navy to oil, and later the displacement of coal by natural gas. Because the straight-line decline in the growth rate of total production starts long before the peak and continues long after, for Rutledge this suggests the cause is fundamentally geological, reflecting the increasing difficulty of expanding production while exploiting resources of progressively poorer quality. “Had you known this method in the 1920s,” Rutledge says, “you could have predicted accurately where British coal output is today.”

He has also applied it to today’s major coal-producing countries, including the US, China, Russia, India, Australia and South Africa – with startling results. Hubbert linearisation suggests that future coal production will amount to around 450 billion tonnes – little more than half the current official reserves.

The idea of an imminent coal peak is very new and has so far made little impact on mainstream coal geology or economics, and it could be wrong. Most academics and officials reject the idea out of hand. Yet in doing so they tend to fall back on the traditional argument that higher coal prices will transform resources into reserves – something that is clearly not happening this time.

So what if coal does peak much sooner than most people expect? According to the International Energy Agency’s latest long-term forecast, economic growth will require global coal production to rise by more than 70 per cent by 2030, so if Rutledge is right, the world is heading for an energy crisis even worse than many already predict. Hopes that coal-derived liquid fuels will be able to step in as oil runs out will also be dashed.

The sliver lining to this gloomy scenario is its effect on climate. Forecasts by the Intergovernmental Panel on Climate Change assume more or less infinite replenishment of coal reserves, in line with traditional economic theory. Less coal means less carbon dioxide, so the impact on emissions could be enormous. Using one of the IPCC’s simpler climate models, Rutledge forecasts that total CO2 emissions from fossil fuel will be lower than any of the IPCC scenarios. He found that atmospheric concentration of CO2 will peak in 2070 at 460 parts per million, fractionally above what many scientists believe is the threshold for runaway climate change. “In some sense this is good news,” Rutledge says. “Production limits mean we are likely to hit the general target without any policy intervention.”

A total of 9,585 MW of capacity was added during the last fiscal, of which 4,287 MW or 45 per cent was by private developers, most of which had earmarked significant portions to be sold on the spot market. During the current fiscal, a capacity addition of around 14,000 MW looks likely, of which around 40 per cent could be private projects, again mostly merchant capacities.

According to a senior CEA official, a serious situation is brewing in the power sector. “It is now fairly certain that by the middle of the Twelfth Plan (by 2014-15), the country should be in a comfortable situation in terms of generation capacity on the ground. The danger, however, is that Discoms have neither been financially restructured nor have they upgraded their distribution system. As a result, we are likely to have a situation where the generation has to be backed down and at the same time there is load shedding.”

During the current year, average tariffs of Rs 3.50 a unit in January gradually surged to a high of Rs 7.75 in April on the IEX, India's largest bourse. Since then it has headed downhill with supply much higher than demand. In September, the average tariff on the IEX was Rs 2.35 a unit.

Merchant power developers are, however, keeping a brave face.

“This year was an aberration in terms of excessive monsoon and the resultant dip in power demand, which caused the crash in prices. Demand is going to be in excess of supply,” an executive from a firm setting up merchant capacity said.

Theo_Fidel wrote:One of the unsung recent reforms that worked was the Electricity Act 2003 that privatized electricity production.
Now we need to work on the DISCOM's. Who would have thunk it. Excess electricity.

http://www.thehindubusinessline.com/201 ... 280500.htm

Merchant power developers in a spot as prices plummet



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According to a senior CEA official, a serious situation is brewing in the power sector. “It is now fairly certain that by the middle of the Twelfth Plan (by 2014-15), the country should be in a comfortable situation in terms of generation capacity on the ground. The danger, however, is that Discoms have neither been financially restructured nor have they upgraded their distribution system. As a result, we are likely to have a situation where the generation has to be backed down and at the same time there is load shedding.”

During the current year, average tariffs of Rs 3.50 a unit in January gradually surged to a high of Rs 7.75 in April on the IEX, India's largest bourse. Since then it has headed downhill with supply much higher than demand. In September, the average tariff on the IEX was Rs 2.35 a unit.

Merchant power developers are, however, keeping a brave face.

“This year was an aberration in terms of excessive monsoon and the resultant dip in power demand, which caused the crash in prices. Demand is going to be in excess of supply,” an executive from a firm setting up merchant capacity said.

World's largest nuclear park is planned in Jaitapur, in Ratnagiri district on the coast of southern Maharashtra. The park would comprise up to six large nuclear reactors bought from the French nuclear giant- Areva. In addition to the inherent hazards of nuclear power, the project threatens the livelihoods of about 10 000 farmers and fishermen and their families. Today, more than a thousand local people have taken action against the project, voluntarily risking lengthy arrest and further legal consequences. The message is clear – they want their land and their fisheries, not paltry compensation offered by the nuclear company. 600 people have already been loaded into police buses and hauled into jails. About 700 more still continue the peaceful protest, risking arrest. Several prominent figures, including a former Supreme Court judge, Justice P B Sawant, former Magsaysay award winner Admiral Ramdas were intending to join the protests, but are reported to have been arrested on the highway, about 20km from the site.

The government initially planned to add 78.7 gigawatts of total power generation capacity in the current five-year plan, then later revised the target to 62.37 GW. But this could still be a struggle, with only 28.57 GW commissioned by October 2010, according to government data.

At the end of October, India had a total installed power generation capacity of 167 GW, with hydro-electric accounting for 22%.

The government also plans to add a further 100 GW total power generation capacity from 2012 to 2017, but in addition to climatic problems other challenges exist, such as timely supply of power plant equipment, fuel availability, forest clearances and commercial viability, Mr. Shankar said.

He added that India will need an investment of $300 billion-$400 billion in the 2012-2017 period to expand its power generation capacity and establish transmission networks.

He added that coal demand will likely double by 2017 from the current level of 450 million tons a year, which could lead to coal shortages of 200 million-250 million tons, resulting in stranded capacity

The government has forecast a coal shortage of 52 million tons this financial year.

Refutes Comptroller and Auditor General’s claim of falling short of capacity.

State-run power producer, NTPC, is likely to achieve 13,020 Mw capacity addition during the 11th Plan, which is 140 per cent of the revised target of 9220 Mw.

A statement released today in response to a CAG report on the country’s largest power producer said it would achieve more than the revised target of capacity addition during the 11th Plan. The CAG had said in its report yesterday that NTPC will be able to add 9,220 megawatts (Mw) of capacity in the five years ending March 2012, falling short of a target of 22,430 Mw from 24 projects.

The statement said the 11th Plan target for NTPC as fixed by the Planning Commission was 17,760 Mw. However, during the mid-term appraisal by the Planning Commission, the target was revised to 9,220 Mw because a number of projects could not be taken up due to factors beyond the thermal power corporation’s control. These projects include North Karanpura, expansion of Kawas and Gandhar and Loharnag Pala.

It said the company had already added 5,290 Mw of capacity during the 11th plan and an additional 2,160 Mw was in an advance stage, which will be commissioned by March, 2011. Another 5,570 Mw is targeted for addition during 2011-12.

NTPC said through close monitoring and best efforts, it had been able to compress the implementation schedule and has commissioned Dadri units 5 & 6 of 490 Mw each and Jhajjar unit 1 ahead of schedule in this plan period.

CAG had said the company had lost at least Rs 16,301 crore in revenues due to the delay in scheduled capacity expansion. CAG also warned that the loss could mount to Rs 40,519 crore if the projects were not completed within the anticipated dates.

The report further said NTPC had failed to generate 71,811 million units of power, thereby missing the opportunity to earn Rs 16,301 crore as revenues. It anticipates that any further delay will result in the failure of power generation of 97,620 million units worth Rs 22,162 crore.

Theo_Fidel wrote:For all it flaws and expense and inefficiencies, BHEL understands the equipment it supplies very well. The one to watch out for is L&T. They have the engineering base to really supply a lot of equipment. They collaborate with Mitsubishi. Still super-critical fluid technology is fantastically dangerous stuff. I think Reliance power will come to regret its contract with Shanghai Electric.

Vipul wrote:FWIW, ADAG's contract with Shanghai Electric covers maintainance for 20 yrs.
Anil Ambani had no choice but to go for chinese gear as he has overstretched himself with his investment commitments and was not in a position to go for fresh debt.He got a very good deal financially and opted for this deal.

The government had approached the states of Maharashtra, Karnataka and Andhra Pradesh for sale of the surplus power, but they expressed their inability to buy power on grounds of deficient funds. They said the Gujarat government was selling them power at a premium and they were not in a position to pay for the same.

Most of the states have transmission losses running up to 30-35 per cent. Added to this is the high subsidy to the agriculture and rural sectors which account for another 30 per cent. As such, the recovery of the losses is passed to the remaining 35-40 per cent of the consumers.

Patel said that these things had raised the financial burden on these states and they had expressed their inability to pay the rates quoted by the Gujarat government.

With this, Gujarat’s solar purchase commitment stands at 933.5 Mw.

As part of the government policy, Gujarat Electricity Regulatory Authority (GERC) fixed a tariff of Rs 15/unit for power to be purchased from solar photovoltaic generators and Rs 11/unit for solar thermal power for the first 12 years.

Known as the home of Patola , one of finest hand woven sarees produced in the world, Patan, a historic city in North Gujarat, is also powering its way ahead to become a hub of solar power generation. As many as 16 solar power companies will set up their power plants in solar park being developed at Charanka village in Patan district.

Gujarat government on Thursday launched Asia's first ever solar park at Charanka, which is barely 16 km away from the Pakistan border. The solar park, the first of its kind in the country, will house solar power generation capacities worth 500 Mw by different individual companies that will bring investments worth more than Rs 7,500 crore in the park.

The Gujarat solar power park, which is also named Swarnim Surya Tirth by the chief minister, is spread over 2000 hectares of land. Out of this about 1000 hectares is the government waste land, while approximately 1000 hectares is private land, which will be acquired as and when required, a top government official informed.

not gandhi nehru family name

Some of the other allottees that will set up power plants at the park include, GMR Gujarat Solar Power Pvt Ltd (25 MW), Sun Edison Energy India Ltd (25 MW), Alex Astral Power Pvt Ltd (25 MW), Roha Energy Pvt Ltd (25 MW), Emami Cement Ltd (10 MW), Azure Power (5 MW) among others.

Union Power Minister Sushil Kumar Shinde has said that India would be a power surplus nation with the addition of 45,000 MW of power during the 12th Five Year Plan period.

"We have added about 44000MW of capacity during the last four-and-a-half years. Last year capacity addition was 9,585MW, which is the highest in a year. We have a target of generating 15000MW this year," Shinde told a seminar here on Sunday.

"With the completion of various power project within the 12th plan we would be able to add 45000 MW" he said, adding that after the independence India used to generate 1400 MW and now the country generates 1,67,000MW.

"The power sector in the country has immense potential. I hope that private sector would use the same in the coming days," he said.

Regarding Tripura's commercial supply of power to Bangladesh, Shinde said that since Tripura is a small state and it would
also soon become a power surplus state in coming days, as it can sell its power resources to other countries.

"Yes, Tripura needs very little power and see at the moment there is some shortage but soon Tripura will become a surplus (power) state and they can sell their power. Even today, while I did review, even today they sell power to other countries," he added.

Ashoka wrote:http://www.financialexpress.com/news/in ... e/732604/1

India to become power surplus nation: Shinde


What's up with 45000 MW added in last 5 years? Wasn't that number supposed to be hovering around 28000 MW mark?

Shinde said that in order to meet the growing needs of the economy, a capacity of 62,374 mw was being targeted during the current plan period,

The Central Electricity Authority has pegged the power capacity addition target for the 12th Plan (2012-17) at twice the 11th Plan (2007-12) target of 62,374 mw, Union Power Minister Sushilkumar Shinde announced recently.

The government had approached the states of Maharashtra, Karnataka and Andhra Pradesh for sale of the surplus power, but they expressed their inability to buy power on grounds of deficient funds.

Incidentally, the state government had made a profit of Rs 1,000 crore in the last financial year by supplying power to distribution companies (discoms) in Gujarat at the same rate it had offered to the power deficit states.

Minister of State for Power Saurabh Patel said Gujarat was able to reduce its transmission and distribution losses to almost 20 per cent from the previous 32 per cent by initiating several measures like bifurcation of feeders in the agricultural sector and rural areas

He said this problem will resurface when the private power generation companies being set up in the state begin operation as they will find it difficult to get buyers for the surplus power generated.

Gujarat generates 12,000 MW power per day. Patel said another 8,000 MW will be added when the power plants under construction go operational in the next two to three years.

rahulm wrote:In short, MSEB is broke and does not have the segregation of infrastructure to buy power to supply to genuine consumers who can afford to and will pay because more than half of the power will simply be subsidised/stolen

The issue with Mah is generation capacity - they dont have enough generating capacity on stream to meet demand...

The weekly meeting of the Democratic Front cabinet on Wednesday saw a lengthy debate over neighbouring state and now arch rival Gujarat’s progressive approach towards economic growth and the lack of a similar attitude here.

The ministers also spoke about the energy scenario and the minimum hours of loadshedding boosting the industrial sector in the investment friendly state.

“Everything is on course” for the enriched uranium fuel bundles to be loaded into the first reactor of the Kudankulam Nuclear Power Project (KKNPP), Tamil Nadu, by the end of March and the reactor will be started up in April. “That is the target today,” said S.K. Jain, Chairman and Managing Director, Nuclear Power Corporation of India Limited (NPCIL).

“The hot run of the reactor will start in a few days. All the systems have already been individually commissioned. Some of the systems were commissioned in an integrated fashion when the cold run was done. Although this VVER-1000 reactor from Russia is the first-of-its-kind to be built in India, we have not come across any problem in the individual commissioning of the systems,” said Mr. Jain.

This is largely due to higher availability of uranium from France, Russia and Kazakhstan under inter-government agreements.
Areva of France has supplied NPC 300 tonnes uranium for Rajasthan Unit-2, which is operating above 100 per cent capacity. India has entered into long-term uranium supply agreements with Russia and Kazakhstan. NPC’s installed capacity from 19 reactors is 4,680 Mw.

Besides, domestic uranium supply from the six mines in Jharkhand has risen 1.5 times in a year.

South African President Jacob Zuma has forecast a “great future” for relations with India as he pushes for a partnership with one of the world’s fastest-growing economies. Side effects for his country may include higher inflation and a power crisis. Indian purchases of South African coal are beginning to suck up the low-quality fossil fuel used by national utility Eskom Holdings Ltd., which is spending $56 billion on a five- year expansion. As miners like Anglo American Plc (AAL) and Xstrata Plc (XTA) benefit from a 44 percent jump in prices over the last year, the government and Eskom say exports may need to be controlled. “The price of coal is much more important than just for Eskom,” Cornelis van der Waal, an energy analyst at Frost & Sullivan, said from Cape Town on March 18. “It’s the government’s duty to intervene to ensure that the bigger interest of the country, and not just the coal-mining groups, derive the benefit of the minerals of the country.” Nations including Indonesia, the world’s largest exporter of power-plant coal, are considering restrictions on mineral exports to safeguard their economies. South Africa relies on coal for 93 percent of its 40,870-megawatt power-generation capacity. That’s the most of 12 countries heavily dependent on the fuel, according to London’s World Coal Association.
India’s coal imports may rise to 600 million tons in 2030 from 2010’s 85 million tons, Kolkata-based mjunction services Ltd., a web-based commodity trader, said in a February presentation. The government is increasing power capacity by 18 percent to 200,000 megawatts by 2012. ‘No Option’
“India is probably left with no option but to import lower grades of coal because of growing demand and insufficient domestic production,” said K. Sriram, general manager of Singapore’s Trust Energy Resources Ltd., a unit of Tata Power Co., which is building a 4,000-megawatt power plant in India to use imported coal.

India saw an electricity generation of 811 billion units in the last fiscal, marginally lower than the set target, primarily on account of shortage of coal and water.

The country, which needs enhanced infrastructure and power capacity to sustain high growth trajectory, had targeted an electricity generation of 830.8 billion units (BU) in 2010-11.

Latest figures from the Central Electricity Authority (CEA) show that power generation stood at 811.1 BU in 2010-11.

However, the figure represent a growth of over five per cent as against 768.4 BU achieved in 2009-10 financial year.

The statistics exclude generation from plants having capacity of 25 MW capacity.

In the last fiscal, the electricity generation from thermal power sources stood at 664.9 BU compared to the target of 690.9 BU.

Suraj wrote:Does anyone have an update on the UMPPs ?

Rachita Prasad, ET Bureau Aug 25, 2011, 03.55am IST

MUMBAI: It has all come down to a rupee. But the one rupee increase in the cost of generation could set Tata Power back by Rs 1,800 crore when it switches on the first 800 mw unit of its 4,000 mw ultra-mega power project in Mundra next month. Tata Power is contracted to sell power from this project to five states at an average price of Rs 2.26 per unit. But imported coal prices have risen in the aftermath of Indonesia's decision to link prices to international benchmarks. The setback would make a mockery of the 14% return on equity norms provided by the Central Electricity Regulatory Commission for such projects.

So, the Tatas are renegotiating. But ADAG's Reliance Power has halted work on its 4,000 mw Krishnapatnam ultra-mega power project (UMPP) in Andhra Pradesh on similar concerns. "The issue is that we don't have sufficient coal today and we won't have it tomorrow," says Reliance Power's CEO JP Chalasani. "So we will have to supplement it with imported coal. Krishnapatnam is not the only project that has been impacted, it is a sector issue."

Both Tata Power and Reliance Power had bought coal mines in Indonesia to fuel their power plants. But the local government changed its policy, making cheap export of coal impossible. Under new norms, coal exported out of Indonesia would be up to 150% more expensive, thus making the project economics go awry.

But can private power producers ask for contracted rates to be renegotiated due to fuel price rise? The power ministry doesn't think so.

That's just one issue that has stymied UMPPs, but it is not the only one.

A third such project is yet to tie up funds even as interest rates continue to rise. Another has concluded initial bids but only after a delay of 18 months due to issues relating to environment clearance. Bids have been invited for yet another but it is yet to get the nod from the environment ministry.

About Rs 100,000 crore of investments are riding on just these five projects put together. But more than that, India's power security hinges on these UMPPs - a total of 16 such are planned in the 12th Five-Year Plan. Together, they were to add 64,000 mw, an increase of 40% from the nation's power generation capacity. They are desperately needed to achieve the target of 100,000 mw capacity addition in the 12th Five-Year Plan (which starts next year). Together, they could light up around 53 million households. They could have helped overcome a peak power deficit of almost 9%. They could also have shown how the private sector could catalyse infrastructure development. But none of this seems likely now.

Can contracted rates be renegotiated?

Private UMPP developers would want that, but the union power ministry won't oblige. The state electricity boards can't oblige given their poor finances. And making consumers pay higher tariffs is never easy.

"The power purchase agreement is between the buyer and the seller," Power Secretary P Uma Shankar told ET. "They need to discuss it to understand the issue and what can be done to resolve it." The buyers, in this case, happen to be 10 state electricity boards, most of which are starved for cash.

In the case of Tata Power, the contract provides for cost escalation for 45% of fuel cost, but the Reliance Power agreement is structured without any escalation clauses. Fuel accounts for almost 70% of the generation cost for a company. At the time of bidding, developers may quote lower charges for escalation in fuel prices to make their bids more competitive. But they have to bear the risk.

"The government cannot intervene in a contract between these companies and the procurers," a senior power ministry official said on condition of anonymity. "The competitive bids were based on companies' own assessment of risks and the burden of price risk has to be borne by the developer. Changes, if any, must be done in consultation with the buyers." But that would be a long drawn out process, because there are many contracts to be renegotiated with many electricity boards.

Tata Power is in pact with the electricity boards of Gujarat, Maharashtra, Punjab, Haryana and Rajasthan. Reliance Power is contracted to sell electricity at 2.33 a unit to Andhra Pradesh, Tamil Nadu, Karnataka and Maharashtra.

Ultimately, the country would lose if there are such delays. The industry lobby may be using that as leverage to make the best out of a bad situation.

"It (renegotiation) may violate the pure logic of a bid but the government needs to have a sympathetic approach as it is inconceivable for the private sector to make predictions for the next 25 years," says Vinayak Chatterjee, chairman of infrastructure consultancy firm Feedback Ventures. "These are assets where private and public money and interest is at stake. States should consider the reasonable solution looking at the larger picture."

"It is more than four years since the UMPP policy was framed. It is necessary to take stock and allow extensive feedback," says former power secretary RV Shahi, who spearheaded the policy when he was the power secretary from 2002-2007. He is now the chairman of consulting firm Energy Infratech. "If certain provisions (in the upcoming UMPPs) need to be changed, elaborated or added, it should be considered," he adds.

Under the UMPP policy, the government identifies a project and sets up a shell company that secures land and other clearances. The shell company is then transferred to the developer who is willing to develop the project for the lowest tariff.

Expect long-winding renegotiations in the old projects. But there is a rethink on UMPPs that will come up for bidding soon.

Light ahead in the tunnel

Power ministry sources say they are considering some changes in the bid conditions based on the problems faced by projects in the past. But these are only for upcoming UMPPs. They rule out any changes in existing contracts.

"We are looking at making some changes in the concession agreements for new projects, but it is too early to say what would be changed," Power Secretary Uma Shankar says. Only four of the 16 such projects have been awarded so far. The rest have run into delays relating to environment clearances, land acquisition and fuel linkages. The delays may now actually go in favour of UMPPs.

Despite setbacks to the first six, the fresh UMPPs that will come up for bidding will attract the private sector's interest, industry sources say. "UMPPs would continue to generate more interest than any other project," says Raaj Kumar, chief executive officer, GMR Energy. "It offers scale, and also other pre-requirements such as land, fuel linkage (in case of pit-head based projects) and clearances. To that extent fund-raising is easier."

Developers are keen that the remaining UMPPs are rolled out without further delays. But financing will pose a challenge.

"Clearly, we all are interested," says Lanco Infratech's Chief Financial Officer J Suresh Kumar. "But it will not be possible for every developer to finance these projects easily in an environment where interest rates are hardening."

Banks have hiked key rates by 200-250 basis points in the past one year following Reserve Bank of India's monetary tightening measures.

What will the price of Coal be doing in the future? Free report. MoneyMorning.com/Coal_Investors"Banks have become more circumspect and cautious, and are being selective," said S Vishvanathan, managing director & CEO of SBI Capital Markets. "Good projects are still being closed financially. But availability of cash with banks is not as plenty as before," he adds. The company managed fund-raising for two of the four UMPPs - Tata Power's Mundra project and Reliance Power's Sasan UMPP. Vishvanathan recalls that banks were earlier aggressive about financing infrastructure projects under the PPP route. Not any more.

Private investment in infrastructure from debt and equity sources has slowed and, consequently, power sector investment may now fall short of targets, Fitch Ratings said in a recent report.

But experts say these hurdles may be a blessing in disguise and can bring in a more realistic approach towards UMPPs. They believe the bids for the next round of these projects may not be as aggressive as developers learn to assess and manage the risk-return trade-offs better.

The last UMPP that was put up for bidding - the pit-head project at Tilaiya - met with a tepid response when financial bids were invited in January 2009. But now, there is renewed interest for the upcoming UMPPs at Orissa and Chhattisgarh, particularly among utilities which missed out on the opportunity for large-scale capacity addition earlier. "But the aggression we saw (in the bids) earlier may not be there anymore," says ICP Keshari, joint secretary in the ministry of power.

"Bankers will advise realistic bids. They will be the balancing factor," says Debashish Mishra, senior director, consulting, Deloitte Touche Tohmatsu India. "Most bids are likely to come clustered around the same level." He does not rule out a freak high bid by a company which may have lost out earlier.