Cheyyur plant not financially viable: Experts

A report from the Institute for Energy Economics and Financial Analysis (IEEFA) questioned the financial viability of the proposed Cheyyur Ultra Mega Power Plant (UMPP), where the tariffs would be two to five times that of a typical power plant and dependence on imported coal.
Cheyyur plant not financially viable: Experts
Jai Sharda and Nityanand Jayaraman


The report assessed tariff rates and risks associated with the Cheyyur project, after the government of India proposed revised bidding guidelines to make the project more attractive. The report estimated that the electricity from the power plant would have levelised cost of Rs 5.93 per unit, far higher than the average cost of coal-based energy. The plant also faces litigation on several fronts, and land acquisition too is far from completion. The Ministry of Power’s revised bidding guidelines allow promoters to build, operate and own the project and to pass on fuel cost and foreign exchange volatility to electricity consumers. 
However, Jai Sharda, a financial analyst with IEEFA and one of the authors of the report, said, “The fuel-cost passthrough will expose consumers and the state electricity board to tariff volatility. The Cheyyur project is particularly irrelevant considering that Tamil Nadu is set to become power surplus.” Environmentalist Nityanand Jayaraman pointed out that the debt-ridden TANGEDCO should use its scarce resources in improving its transmission and distribution infrastructure, inadequate for a city with increasing population. 
“In 2016-2017, Tamil Nadu is expected to generate 11.2% more than what we need, according to the Central Electricity Authority. However, the aggregate technical and commercial losses of the Tamil Nadu’s electricity infrastructure is 24.4%, which means close to a quarter of all the electricity that is being produced is lost before it reaches the consumer. If you look at the world’s best practices, Germany has a loss of merely 5% and global average is 6-8%. Even if we bring our losses down by 10%, we would have saved close to 15% of the electricity. 
Moreover, TANGEDCO is a loss making entity, due to the culture of subsidies and freebies. Pursuing an extremely expensive project and financially fraught project like Cheyyur, the government should focus and invest its resources in improving its transmission and distribution infrastructure,” he concluded. 

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