Tilaiya pull-out snowballs: Was Reliance Power arm-twisting Jharkhand govt to raise tariff?

Reliance Power’s termination of power purchase agreement for its Rs 36,000 crore Tilaiya ultra-mega power project has snowballed into a political controversy, with the Jharkhand chief secretary claiming that the company is armtwisting the state government to increase the power tariff. According to a report in The Times of India, state chief secretary Rajiv Gauba has lashed out at the Anil Ambani-promoted company alleging that its officials never raised the land acquisition issue at a meeting held on 17 April. “…What they were concerned about was the revision of power tariff,” the official has been quoted as saying in the report. The company cited inordinate delay in land acquisition as a reason for taking he extreme step yesterday. According to the statement issued by the company, there has been a delay of over 5 years in land acquisition by the state government for the power plant, captive coal blocks and related infrastructure. The PPA required procurers to handover land and other clearances by February 2010. “However, the required land is yet to be made available. Even the forest land in the power station area, for which the Stage-II Forest Clearance was accorded by central government way back in November 2010, has not been handed over to JIPL till now. As regards the coal block, the land acquisition process is yet to get initiated, for which the application was submitted way back in February 2009,” the statement said. [caption id=“attachment_1398635” align=“alignleft” width=“380”] Reliance Power chairman Anil Ambani. PTI[/caption] However, government officials had refuted the charges by the company in a report in The Economic Times, saying the government had only 10 days back made time-bound commitments on land acquisition to the company. They termed the company terminating the agreement as “unilateral” decision. The chief secretary has today said that the decision by the company has come at a time when the government has fast-tracked all pending processes to kick start the project. According to Gauba, the company was to pay Rs 300 crore for the forest land, over and above the compensatory afforestation and probably it was not willing to pay that, which might have prompted the pullout. Meanwhile, borkerage Nomura has come out with a report t terming the company’s decision a “calculated gambit”. “Prima facie, there is potentially no direct financial downside per se for Reliance Power if the termination of the PPA for Tilaiya is accepted by the procurers / State Governments, considering that the Rs 800 crore Bank Guarantee and Rs 300 crore capex incurred toward the project is deemed to be ‘recoverable’,” it said. However, it said earlier the management had indicated “that construction of the project was unlikely to start until tariff relief is received from the Central Electricity Regulator (CERC) on account of ‘change in law during the construction period’ and cost escalation due to the delay in land availability and higher compensation related to rehabilitation and resettlement (R&R) issues.” The company had won the project in February 2009 in a tariff-based bidding, in which it quoted a low Rs 1.77 per unit. It had also signed 25-year power purchase agreements with 18 distribution companies in 10 states. In June 2013, it had approached Central Electricity Regulatory Authority to raise tariff. According to Nomura, its petition was admitted by CERC in July 2014. The state government has decided to go ahead with the power project by changing the model, Gauba has said today. Meanwhile, NTPC has stepped in saying that it is “more than willing to come on board”. “In Jharkhand, there is a new government and there is a total paradigm shift on land acquisition. Earlier, there were problems, even NTPC faced it. Going forward, these issues will be resolved,” NTPC CMD Arup Roy Choudhury has been quoted as saying in a PTI report. NTPC was the second lowest bidder for this project in 2009, said the report. Looks like the state-owned company is readying to bail out the state government and also cash in on the controversy.