Modernise old power plants not build new ones

Vol 7, PW 1 (26 Mar 03) Midstream & Downstream

BEFORE DECIDING to extend the Accelerated Generation and Supply Programme by another five years, power ministry bureaucrats re-worked it in the light of lessons learnt from the previous five years.

Not only has the programme been polished up, there is also an incentive for states that push ahead with power sector reforms. "The new programme will focus only on renovation and modernisation of power stations," reveals Jadhav.

"Renovation and modernisation is a neglected area. It is not as glamorous as setting up a new power project.

But the benefits are much higher. A new power project will cost about Rs4.5cr per MW while by renovating and modernising an existing power station the cost works out to between Rs1.5cr and Rs2cr per MW that is released into the system." By March 2007, the power ministry hopes to "release" another 10,000-MW generating capacity into the system.

Important changes are included in the new programme. Interest subsidies will be linked to states keeping to "agreed minimum milestones" in MoUs of the national power sector reform programme.

This means defaulting states will be kept out of the new programme. "Among the eligible states, those who perform better will get preference." Loans from the Rural Electrification Corporation will also be eligible for the interest subsidy, and not just loans from Power Finance Corporation The interest subsidy has been slashed to 3% with a limit of Rs300cr annual limit on net present value basis.

This will release more funds for additional projects. The power ministry will set aside Rs1, 500cr for the five-year extended life of the programme Only renovation and modernisation programmes of state-owned generating companies are eligible