Ultra Mega Power Projects in India

The program of Ultra Mega Power Projects (UMPP) was introduced in 2005 by the Ministry of Power in association with the Central Electricity Authority and the Power Finance Corporation to overcome bureaucratic obstacles hindering the development of large thermal plants and thereby address India's chronic power deficits. The UMPPs are seen as an expansion of the MPP (Mega Power Projects) that the Government of India undertook in the 1990s with limited success. The UMPP program creates a two-stage process. In the first stage the Power Finance Corporation (PFC) creates a shell company called a Special Purpose Vehicle (SPV) to secure clearances, acquire land and water, and obtain commitments for coal. Once these steps have been completed, private companies are given a chance to acquire the shell company under a process of competitive bidding. The bidder guaranteeing to sell power at the lowest levelized tariff is selected.

In addition to the use of the SPV, other distinguishing features of UMPPs are as follows:
 * Use of supercritical technology for higher fuel efficiency and lower greenhouse gas emissions;
 * Allocation of power among multiple states (typically state-owned electric utilities);
 * Dedicated captive coal blocks (rather than coal linkages) for projects located in the interior;
 * Imported coal for coastal projects;
 * Massive scale - typically 4000 MW.

Originally, nine projects were proposed, of which four were pit-head projects and five were coastal projects that would use imported coal. In 2007 the Hindustan Times reported that of the 9 locations initially selected for Ultra Mega Power Project "three including Girye in Maharashtra, Akaltara in Chattisgarh and Tadri in Karnataka may have to be eventually abandoned. Despite being a pit head project, the Akaltara project has been dogged by coal linkage issues, while the Tadri project has been delayed due to various reasons, including the unstable political situation in Karnataka." Later, additional projects were proposed -- see "July 2012 Status".

Terminology

 * Special Purpose Vehicle (SPV) - A special purpose vehicle (SPV), also known as a shell company, is used to provide a temporary sponsor for a project while it goes through the initial stages of acquiring land, water, coal, and clearances. SPVs are wholly owned subsidiaries of the Power Finance Corporation (PFC). Once an SPV completed the initial stage of project development, the project is awarded through a competitive bidding process to a private owner which proceeds to build, own, and operate ("BOO" in economic parlance) the coal plant. A shell
 * Ultra Mega Power Project (UMPP) - Large projects, usually 4000 MW in size, developed using SPVs.
 * Supercritical technology - A coal combustion technology that allows higher efficiencies than older, "subcritical" generation technology. In India, most proposed new plants are supercritical. In China, most proposed new plants use ultra-supercritical technology, which allows even higher efficiencies.

July 2012 Status
According to the Power Finance Corporation, 16 UMPPs are envisioned. As of July 2012, 12 SPVs had been formed, of which four had been awarded to private owners. Table 1 shows the status of the 12 UMPPs for which SPVs have been formed.

Progress on additional Ultra Mega Power Projects in Tamil Nadu, Karnataka, Maharashtra, Andhra Pradesh, Orissa, Gujarat, Jharkhand, and Tamil Nadu was waiting various governmental clearances for land and water.

Coastal versus interior projects
UMPPs planned in Chattisgarh, Madhya Pradesh, Orissa and Jharkhand will come up at pithead locations (near coal mines) and use domestic fuel, while the rest will come up in coastal locations with easy access to imported coal. On the request of the state governments of Andhra Pradesh and Orissa, two more sites have been identified, which consist of a pithead site in Ib-Valley coalfield in Orissa and a coastal site at Krishnapatnam in Andhra Pradesh.

RfQ and RfP Process
The Requests for Qualification (RfQ) process is the first stage for selection of a developer for a SPV. Those companies that pass the RfQ process are then eligible to submit bids under the Request for Proposals (RfP) process.

Selection of developer were issued in 2010 for the Sarguja Ultra Mega Power Project in Chhattisgarh and the Sundargarh Ultra Mega Power Project (also known as the Bhedabahal Ultra Mega Power Project) in Orissa. RfQ bids for Orissa Ultra Mega Power Project were opened in August 2011. The RfQ submission deadline for Chhattisgarh Ultra Mega Power Project were extended after the Ministry of Environment and Forests categorized coal blocks for the project in a "No Go" area.

Operational costs
In a background document on the UMPP's the Ministry of Power stated that "economies of scale leading to cheaper power can be achieved through development of large sized power projects using latest supercritical technologies" and be developed by private companies on the basis of a competitive bidding process. The Ministry stated that the projects would serve a number of states or regional grids. The Ministry estimated that each plant would cost approximately Rs. 15,000 crores. In 2006 the Central Electricity Authority (CEA) Chairman, Mr Rakesh Nath, told The Hindu Business Line, that "the generation cost for these plants is estimated to be between Rs 1.50 and Rs 1.80 per unit."

Surguja UMPP cancelled October 2013
In October 2013, the Power Finance Corporation announced that it was withdrawing the Request for Qualification for the Surguja Ultra Mega Power Project. The announcement follows the decision by the Ministry of Environment and Forests to classify the Hasdeo-Arand coal blocks, which had been allocated to the plant,as no-go areas for mining for mining.

Akaltara Ultra Mega Power Project project abandoned; Tadri Ultra Mega Power Project delayed by political instability
Although Akaltara was reported by the Hindustan Times to be among the 9 locations initially selected for Ultra Mega Power Project, it appears that the location is no longer being considered. The Hindustan Times wrote in 2007 that "three [UMPPs] including Girye in Maharashtra, Akaltara in Chattisgarh and Tadri in Karnataka may have to be eventually abandoned. Despite being a pit head project, the Akaltara project has been dogged by coal linkage issues, while the Tadri project has been delayed due to various reasons, including the unstable political situation in Karnataka."

As of July 2012, the Power Finance Corporation, which oversees the Ultra Mega Power Project program, does not list Akaltara as a potential project in Chhattisgarh. Instead, Surguja Ultra Mega Power Project is listed as the sole project in Chhattisgarh.

Other large projects
Although many press reports refer to any very large power project in India as an "Ultra Mega" project, not all large projects are actually Ultra Mega Power Projects since they are not organized under Special Purpose Vehicles. The following are several large projects that are not UMPPs:


 * Pudimadaka Ultra Mega Power Project - Andhra Pradesh (NTPC)
 * Vadarevu Ultra Mega Power Project - Andhra Pradesh (APGENCO)
 * Devgad UMPP - Maharashtra
 * Marakkanam Super Thermal Power Project - Tamil Nadu

Community resistance derails Girye Ultra Mega Power Project
In 2007 the Hindustan Times reported that the site for the project was selected "after the Central Electricity Commission carried out a detailed feasibility study and gave its go-ahead completely overlooking sensitivities of local alphonso growers." (Alphonso is another name for a variety of mango). The newspaper reported that the "3,000-acre piece of land originally earmarked for the project spreads over four villages with a population of about 4,000." It was also reported that the project was opposed by "a determined group of alphonso mango farmers who have refused to yield even an inch of their land" for the project as there is no alternative land available for alphonso farming.

The Hindustan Times reported that of the 9 locations initially selected for Ultra Mega Power Project "three including Girye in Maharashtra, Akaltara in Chattisgarh and Tadri in Karnataka may have to be eventually abandoned. Despite being a pit head project, the Akaltara project has been dogged by coal linkage issues, while the Tadri project has been delayed due to various reasons, including the unstable political situation in Karnataka."

May 2011: MASS protests Mundra Ultra Mega
In May 2011, a group known as Machimar Adhikar Sangharsh Sangathan (MASS) filed a collective protest against the Tata Mundra Ultra Mega Power Project, saying there are high risks to the project without proper mitigation and accountability measures. The protest is targeted against the International Finance Corporation’s (IFC), the World Bank’s private sector lending arm, whose financing of high-risk coal plants in India faces community resistance. Its Compliance Advisor Ombudsman (CAO) has accepted a complaint against the plant. CAO is the independent body of IFC that handles disputes and compliance issues with its investments.

MASS says the plant is located in the special economic zone (SEZ) that cuts across fishing grounds, habitat of diverse marine lives and wide expanse of farm land, and that the project’s social impact assessment is significantly flawed, as fishing communities were excluded from the list of those directly impacted and IFC green lighted the loan without a cumulative impact assessment.

With a total project cost of US$ 4.14 billion, the IFC is investing a $450 million loan and $50 million in equity. Other financial institutions funding the project are the Export-Import Bank of Korea, Asian Development Bank, India Infrastructure Finance Co. Ltd., Housing and Urban Development Corporation Ltd., Oriental Bank of Commerce, Vijaya Bank, State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Travancore, the State Bank of Indore and other local banks.

The MASS complaint came two months after villagers in Odisha state formally challenged IFC’s funding for the GMR Kamalanga Energy Limited.

Related SourceWatch articles

 * Clean Development Mechanism
 * Association of Power Producers

External articles

 * "Govt plans Ultra mega power projects", Rediff Buisness, February 28, 2006.
 * Mansi Taneja, "Panel for more UMPPs in coastal areas", December 29, 2011.