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Ultra Mega Blockages

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At a time when the ministry of power claims that the first units of the country's first two ultra-mega power projects (UMPP) — Sasan in Madhya Pradesh and Mundra in Gujarat — are expected to be up and running more than a year ahead of schedule, a major portion of land for both the projects is still to be acquired by the government.

The power ministry's own assessment of India's first three UMPPs — Sasan, Mundra and Krishnapatnam in Andhra Pradesh, with a capacity of 4,000 MW each — shows it has lagged behind in meeting its own commitments to the projects.

For instance, for the Sasan project,  the central and state governments had to acquire 3,474 acres of land and then hand it over to the project company. Till the end of September, it had acquired just 1,873 acres.

Around 46 per cent of the required land is still to be acquired. As against a PPA (power purchase agreement) commitment to start the first unit of Sasan by 2013, the company is expected to start the first unit by December of 2011.

Land acquisition has been a major bottle-neck for other infrastructure sectors as well, especially the NHDP (National Highway Development Programme), where even linear tracts of land (as compared to bulk land in one area) could not be acquired on time, delaying even the Golden Quadrilateral that was started in 1999-2000. While UMPPs are a special case where the onus of land acquisition lies on government, in the past, R.S. Sharma, chairman and managing director of NTPC (National Thermal Power Corporation), the country's largest power generating utility, has said one of the biggest bottlenecks has been land acquisition. In fact, he said one major issue for companies such as his is being provided land "free of encumbrances" to execute projects on time.

Of the 3,224 acres of land needed, only 80 per cent for the Mundra UMPP, or 2,559 acres have been acquired. As per the PPA, the first unit was scheduled to be up and running by August 2012, but the company is expected to start the first unit by September 2011. The entire capacity of 4,000 MW each of Sasan and Mundra is now scheduled to start by 2013 as against a commitment of 2016 and 2014, respectively.

Interestingly, progress on land acquisition for the Krishnapatnam project — whose first unit is due to be commissioned only by 2013 — has been much better at 87 per cent.

While the Sasan and Krishnapatnam projects have been bagged by the Anil Ambani-owned ADAG group, the 4000 MW Mundra project has been bagged by Tata Power. The concept of UMPPs involves the government (through Power Finance Corporation) setting up special purpose vehicles for each project, and then handing over the same to the successful bidder with all clearances in place.

While ADAG officials did not want to comment on the status of land acquisition, they claimed such delay would not affect the project. The reason for this confidence is that the shortfall will not hold up work on the projects. For Sasan, where close to half the land is still to be acquired, they say most of the land needed for the "main plant" has already been arranged and that work on this power-cum-coal integrated project is on schedule. The delay, on paper, is in acquiring land for the ash pond — where out of the 811 acres needed, barely 5 per cent has been acquired.

Both the Mundra and Sasan projects were handed over to the developers in 2007 and the promoters achieved financial closure for the two projects in 2008 and 2009, respectively. While the Krishnapatnam project was awarded last year, the fourth UMPP at Tilaiya in  Jharkhand — also bagged by the Anil Ambani group — was handed over this year.

(This story was published in Businessworld Issue Dated 26-10-2009)

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