|From 2G to coal|
|Monday, 25 April 2011 00:00|
On the face of things, Reliance Power’s request that it be allowed to divert around 24 million tonnes of excess coal it has—in the mine attached to the Tilaiya Ultra Mega Power Plant (UMPP)—to other power projects it hopes to win in Jharkhand is a good idea. The government-owned Coal India Ltd is notoriously inefficient, so it is obvious Reliance Power’s plants in Jharkhand will be a lot more competitive if they’re run on coal extracted by Reliance Power instead of coal mined by Coal India. Since Reliance Power has committed that the power that will be generated from using this excess UMPP coal will be sold through tariff-based competitive bidding, it seems a win-win case for all concerned. Based on the coal the Tilaiya UMPP needs (16 million tonnes), the mines attached to the 4,000 MW plant have around 24 million tonnes of extra coal, and that can be used to fire up another 6,000 MW of power in Jharkhand. While the move will benefit the power-starved Jharkhand, it will also help cement Reliance Power’s growth plans in the power sector—cheaper coal will give it the added advantage since, from now on, power can be purchased from new plants only on the basis of a single-tariff bid (in the past, a firm bid only on the tariff for its capital costs while the cost of fuel was a pass-through, and had to be paid for by the buyer).
The problem, however, is that Reliance Power’s proposal for Tilaiya is remarkably similar to what happened in the case of the Sasan UMPP—in that case, too, Reliance Power got permission to use the extra coal (all the time ensuring the needs of the Sasan UMPP were fully met) for its other plants and the power produced from this was to be sold through tariff-based bidding. And, in the Sasan case, the Tatas have taken the government to the Supreme Court for giving permission to divert the UMPP’s coal after the project had been bid out—the Tatas went to the Supreme Court after the Delhi High Court dismissed their plea. The argument is a simple one: had other bidders known the UMPP coal could be used in other power plants, they would have bid higher prices for the UMPPs since they would then take into account the profits they’d make in other power plants by using the lower-cost UMPP coal. At a time when the government’s attempt is to try and find ways to minimise government discretion, the last thing it wants to be accused of is abuse of discretion. It would be a good idea, in future projects, to formally allow using excess coal in other plants instead of allowing this later. Pre-bid transparency has to be the name of the game. Else this will become the next 2G scam.