L&T may pull out of hydro power projects

Pratibha Chauhan

Tribune News Service

Shimla, July 1

Low power rates and lack of basic infrastructure have compelled another major power producer — Larsen and Toubro (L&T) — to urge the state government to enter into a power-purchase agreement (PPA) with it for two of its hydel projects — Reoli Dugli (Lahaul-Spiti) and Sach Khas (Pangi), located in the arduous Chenab basin.

Larsen and Toubro has already invested over Rs 200 crore in these projects on investigation and getting the designs, drawings ready. The company is reluctant to start the projects, considering the fact that the cost of power is working out to be almost Rs 9.90 per unit, whereas the power rates in the market are hovering around Rs 2.50 to Rs 3 per unit. Incidentally, the production cost per unit is so high after the concession given by the government of exempting projects in the Chenab basin from providing 12 per cent free power to it.

In its letter addressed to the Director, Energy, the company has pointed out that there is no road infrastructure in the area and there is a provision for evacuation of power. Another stumbling block is the hurdle being faced by the company in getting clearances for starting work on the two self-identified projects of Jindi (4.4 MW) and Choo (3.5 MW) allotted to it by Himurja to meet its own power requirement for the construction of two big projects.

Larsen and Toubro had been allotted the 430-MW Reoli Dugli project near Udaipur in the tribal district of Lahaul-Spiti in January 2011. The other project allotted to it was 267-MW Sach Khas in Pangi, Chamba district, in September 2009. “The company seems to be reluctant to go ahead with the project unless the state government enters into a PPA with it as they are anticipating problems in evacuating power, with the market being very grim as far as buyers and power rates are concerned,” admitted an official.

The possibility of Larsen and Toubro too following the path adopted by Reliance and Tata cannot be ruled out. They have paid about Rs 200 crore as an upfront premium and with several hardships being faced in starting the work, they could back out.

The disinclination being shown by Larsen and Toubro comes close on the heels of surrendering projects by the Reliance and Tata group.

The Tata group has now written to the Directorate, Energy, expressing its desire to surrender the 450-MW Duggar power project in the Pangi area of Chamba district. The Cabinet gave approval for returning Rs 85 crore paid as the upfront premium by Reliance after they declined to set up the two projects of Purthy (Pangi) 300 MW and Sumte Kothang in Spiti (130 MW).

 Works allotted to company 

• Larsen and Toubro had been allotted the 430-MW Reoli Dugli project near Udaipur in the tribal district of Lahaul-Spiti in January 2011
• The other project allotted to it was 267-MW Sach Khas in Pangi, Chamba district, in September 2009