Tilaiya UMPP: Discoms to terminate PPA

Electricity distribution utilities (discoms) have reached an agreement to terminate the power purchase agreement (PPA) with the Tilaiya ultra mega power project (UMPP) in Jharkhand.

The development is a positive for Anil Ambani-promoted Reliance Power, which in April decided to exit the 4,000-MW project following delays in land acquisition.

''In a meeting held earlier this month, the majority of the 18 distribution utilities in 10 states have agreed to accept termination of PPA and the terms of compensation to be paid to Reliance Power,'' said an official privy to the development, The Financial Express reported.

Responding to queries as to why discoms would take this unexpected step, the official said, ''Procurers' decision to agree on the compensation terms is aimed at avoiding long-drawn litigation and auctioning the project afresh, based on newly developed bidding documents for UMPPs.''

This would mean a compensation of Rs114 crore for debt-laden Reliance Power as also other agreed expenditure, while another Rs800-crore bank guarantees issued to procurers and the coal ministry would be released.

Reliance Power had earlier approached the court for a stay on encashment of its Rs 800-crore bank guarantee.

According to commentators, with the decision of a majority of 18 distribution companies in 10 states a long-drawn legal wrangle would be avoided making way for a quick reauctioning of the project in plug-and-play mode under new norms for UMPPs, which were being worked out by the power ministry.

The power company had bagged the project in 2009 after competitive bidding by quoting a tariff of Rs 1.77 per unit withdrew in April, citing a five-and-a-half-year delay in handing over of land.

The project, which was give the  Kerendari BC coal block as captive mine required 17,000 acres of land.

The company added, the project, which was to come up by 2017, would not be completed before 2023-24, in view of the prevailing status of land acquisition.