Maharashtra surprised at decision to pull out

Vol 4, PW 12 (19 Jul 00) People & Policy

Maharashtra state officials express surprise at the snap decision of Electricite de France to quit the Bhadrawati project.

"Just last month the escrow issue was cleared by the state cabinet with the modifications Ispat wanted," Dr Pramod Deo, state energy secretary tells Petrowatch, "Only the coal pricing issue is outstanding. It is next on the agenda and we thought they would wait till it is sorted out." Deo said negotiations are continuing between lead promoter Ispat and state-owned Western Coalfields.

"To that extent the pull-out is a surprise." Under the original project plan, the power plant was to have sourced coalfrom a captive coal mine. But the plan was aborted when it was discovered that the plant was too close to a state-owned munitions factory.

"Our inability to source coal from a captive mine was the main setback for the project," adds Dr Deo. Soon after, Ispat began lengthy negotiations with Western Coalfields and Coal India.

However, the company discovered that the coal price was too high and would lead to the generation of expensive electricity. This, believes Dr Deo, is the main reason why EdF quit the project.

"I feel EdF decided that selling costly power is not the best way to enter India," he said, "I think EdF will focus on transmission and distribution only." Inexperience of the free market at state-owned Coal India and Western Coalfields is blamed for the slow pace of negotiations on price. Until now the two companies have sold only to state electricity boards at a price fixed by the government.