Date:26/10/2005 URL: http://www.thehindubusinessline.com/2005/10/26/stories/2005102602830700.htm

Back Orissa demands free power from Mahanadi Coalfields' project

Ambarish Mukherjee

New Delhi , Oct. 25

THERMAL power generation projects in the country could come up against a fresh roadblock. In an unprecedented move, the Orissa Government has placed a demand for 12 per cent free power from a generation project proposed by Coal India Ltd (CIL) as part of its plans to diversify into power generation.

Mahanadi Coalfields Ltd's (MCL), a subsidiary of CIL, is in talks with Orissa Government for setting up a 2,000-MW thermal power plant. However, during the negotiations, the State Government came up with the demand for 12 per cent of the power generated by the plant free of cost, as is done in the case of hydel power generation.

Legal issue: Highly paced sources in MCL told Business Line, "MCL is unable to agree with the Orissa Government on the demand for free power. It is a legal issue dealing with the right of the State Government and the Centre.

"Underground coal is a national property but State Governments are entitled to get a royalty for the coal mined within the State. Once we pay the royalty to Orissa Government, we are not bound to give them free power generated by using that coal, which is what the State Government is insisting upon," MCL officials said.

CIL is in talks with Neyveli Lignite Corporation (NLC) and the National Thermal Power Corporation (NTPC) for the project.

"Because we are unable to reach an agreement with the State Government, we are unable to finalise the structure of the possible joint venture we may have either with NLC or NTPC," officials said.

MCL's options: MCL is open to several options. "We can set up a joint venture company or we may go in for a strategic alliance with NCL because both CIL and NLC are fully owned by the Centre and comes under the same administrative ministry. However, if the project is done with NTPC, then it would have to be through a new company because several administrative issues would be involved," officials said.

According to CIL officials, the investments would be made by MCL only. The exact amount of investments would be worked out once the problem with State Government is sorted out.

"We are planning to set up the plant at the pithead of one of our mines in Orissa. There are three possible locations and it would be economical because we would not be dependent on the railways for transportation, thereby saving on costs and delays in supply," company officials said.