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Cuddalore project faces setback

March 12, 2008

LiveMint.com

The government's ambitious plan to start power generation through ultra mega power projects (UMPPs), each with a capacity of 4,000MW, has suffered yet another setback, with a proposed site for one such at Cuddalore, in Tamil Nadu, being found unsuitable—it houses people displaced by the 2004 tsunami, whoo cannot be evicted.

"We are now looking for alternative suitable land," said a government official, who did not wish to be identified. The government had planned to set up two projects in Tamil Nadu, at Cuddalore and Marakkanam. This is not the first time UMPP meant for the state has run into problems. The state had earlier decided to shift one UMPP that would be powered by imported coal from Cheyyur to Cuddalore due to high land prices as reported by Mint on 7 November.

"Tamil Nadu has an installed power generation capacity of 10,000MW and plans to raise this to 13,000MW by 2012."

Of the nine proposed UMPPs, six are on track. While the projects at Mundra in Gujarat, Sasan in Madhya Pradesh and Krishnapattnam in Andhra Pradesh have been awarded, those at Tilaiya in Jharkhand, Cuddalore and Marakkanam in Tamil Nadu, and Jharsuguda in Orissa are yet to be assigned. The Centre has abandoned plans to set up UMPPs at Girye in Maharashtra, Tadri in Karnataka and Akaltara in Chhattisgarh for reasons ranging from environmental concerns to differences with the state government.

To reduce risks associated with power projects and increase investor confidence, the UMPP policy entails the creation of special purpose vehicles (SPVs), or firms that work with the concerned state government and local bodies to get land, and obtain requisite environmental and other clearances. Eventually, these SPVs are transferred to the successful bidder. In such a scenario, the role of the states is an important one.

The government is now worried about the fate of its flagship initiative to build generation capacity and finance minister P. Chidambaram had mentioned these concerns in his Budget speech.

"It is possible to bring five more ultra mega power projects in Chhattisgarh, Karnataka, Maharashtra, Orissa and Tamil Nadu to the bidding stage provided the states extend the required support. I urge them to do so," Chidambaram had said in his speech on 29 February.

"It is a signal to the states from the finance minister. In the absence of state support nothing can be done. Though there were (earlier) problems with Girye, Tadri and Akaltara sites, now even (the sites in) Tamil Nadu have joined their ranks," said an official at the Central Electricity Authority, the apex power planning authority in the country, who did not wish to be identified.

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