The Sasan UMPP mess
Television is the first truly democratic culture -- the
first culture available to everybody and entirely governed by what the people
want. The most terrifying thing is what people do want.
— Clive Barnes (1927-), British theater critic
The Empowered Group of Ministers (EGoM) has concluded that
the response to the Request for Qualification (RfQ) of Globeleq Singapore Pte.
Ltd (lead) and Lanco Infratech Consortium for the Sasan Ultra Mega Power Project
in Madhya Pradesh was void ab initio, and directed Sasan Power Ltd to examine
further action and report to the EGoM "expeditiously".
Sasan Power and the Globeleq-Lanco Consortium have a checkered history. The
letter of intent for the pithead coal-based 4,000-mw thermal project was awarded
to the consortium on December 28 last year on the basis of its offered tariff of
Rs 1.196 per kwh, the lowest among the nine bidders, with the worst quote at Rs
2.26 per kwh. The aggressive rate had surprised the industry as the average
tariff rate at NTPC's existing coal-based thermal plants works out to around Rs
1.4-1.5 per unit.
But, immediately, the bonafides of the consortium came under a cloud. Globeleq
sold its assets worldwide and Lanco Infratech joined hands with Jindal Steel &
Power in the consortium to acquire Globeleq Singapore. Incidentally, JSP's was
among the worst bids. There were also doubts over the capability of Globeleq to
handle the Sasan project. Financial consultants E&Y suggested to Power Finance
Corporation, the nodal agency for the project, that Globeleq Singapore had
misrepresented financial and technical details. This happened in April. Based on
these developments, the EGoM held a meeting on July 3 and deferred its decision
on the transfer of Sasan Power to the consortium, followed by a decision on July
24 to reject the bid altogether.
Sasan UMPP is one of nine ultra mega power projects to be set up through
tariff-based competitive bidding and only the second where the letters of intent
have been given. These nine UMPPs are to add some 36,000 mw within a span of six
to eight years.
We would not question the decision of the EGoM on Sasan, but we would certainly
like to ask why it took so long (nearly four months) to take this decision;
worse still, even now the EGoM has not fixed the time limit for Sasan Power Ltd
to suggest the next course of action for the project that constituted a new
generation giant power capacity initiative. The country is desperate to see new
capacities come up as fast as possible. Ministerial conferences have been
emphasising on the timely completion of power capacities as a major reform
agenda. Obviously, reforms are for consumption of bureaucrats only, and
distressingly, non-technical managerial issues and not equipment supplies etc.,
are found to be responsible for holding back power projects. The government must
now at least ensure that such "mishaps" do not happen in future.
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[30 July 2007]