Investment in coal power set to rebound in India’s Madhya Pradesh state

Investment in coal-based power could rebound in India’s central Madhya Pradesh state after over a decade with the announcement of two mega-size projects, each with a capacity of 1,320 megawatts (Mw), the Business Standard newspaper reported last week.

The estimated expenditure on each project is Rs 11,220 crore. The two projects would come up in Anuppur and the Lok Sabha constituency of Chief Minister Kamal Nath, Chhindwara.

Sector experts said the project cost would be around Rs 8 crore per unit resulting in tariff of Rs 5.5-6 per unit. “The fixed cost would be Rs 3.5-4 per unit while the variable cost would depend on coal linkage location. It could be around Rs 2 per unit,” said a Delhi-based expert.

MP is currently one of the leading states in renewable capacity addition including mega 750 Mw Rewa solar project. Rewa saw a tariff of Rs 2.97 per unit. The last mega coal power project awarded through bidding to private sector was in 2008. This included four ultra mega power projects of 4,000 Mw — of which only two could come and several state projects. Since then, barring NTPC’s, no major investment took off in conventional power.

Currently, more than 40,000 Mw of thermal projects set up during this decade face threat of becoming non-profitable assets. In the face of this, a fresh tender is likely to revive investment in the languishing sector.

The state has invited private players to set up the project on build-operate-own (BOO) basis. The power purchase agreement (PPA) would be signed under the regulations stipulated in Section 63 of the Electricity Act. The section stipulates rules for tariff-based competitive bidding for award of power project.

Officials in the MP government told Business Standard said the state is planning for the power demand scenario in 2024-25. The current peak demand of the state stands at 63,000 Mw. Its installed capacity is 21,872 Mw, of which 4,386 Mw is renewable power.

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