India’s Entry Into Lanka’s Power Sector Delayed
- CEB and Indian officials to discuss on the 19th
By Mandana Ismail Abeywickrema
Ceylon Electricity Board (CEB) officials and Indian officials are to meet on Tuesday (19) morning amidst much controversy to discuss changes to the power purchase agreement and the implementation agreement in the 500MW Sampur coal power plant project.
The outcome of the discussions on the 19th would determine the signing of the final agreements between the CEB and India’s National Thermal Power Corporation Ltd. (NTPC) on setting up the Sampur coal power plant, which is a joint venture project.
While the power purchase agreement is to be signed between the CEB and NTPC, the implementation agreement is to be signed with the Treasury.
The Sampur power plant project is also the largest Indian funded project to be carried out in Sri Lanka. It would also mark India’s entry into the country’s power sector. The Chinese in fact beat the Indians in entering Sri Lanka’s power sector through the Norochcholai coal power plant.
Power and Energy Ministry Secretary M. M. C. Ferdinando explained that the CEB discussion with the Indian authorities on the power purchase agreement would be on amending the ‘heat rate’ and the operations and maintenance cost.
The heat rate in the current power purchase agreement is stated as 2,600 kilocalories to generate a unit of power from the plant, which, according to energy experts, is an excessive amount.
He said that the discussion with the Treasury would be on an amendment to the implementation agreement regarding the return on investment.
The Sri Lankan government is looking at minimizing the return on investments from its current 18% to a lower rate.
“When the initial agreements were reached on the power plant, the Sampur area was not easily accessible following the war. However, the situation has now changed,” Ferdinando noted.
He pointed out that the CEB and the NTPC had signed a memorandum of understanding (MoU) in December 2009 on the coal power project and that all agreements had been finalized by 2010.
However, CEB engineers have noted that some areas in the agreements needed to be looked at again and changed.
The engineers have explained that the excessive heat rate would result in the coal plant maintaining a low efficiency level and sought changes to a more moderate level.
A joint venture company, the Trincomalee Coal Power Company has been incorporated with equal equity (50:50) contributions by NTPC and CEB.
Ferdinando said that the technical issues over the agreements had cropped up after the joint venture agreement was signed.
According to initial estimates, the construction work on the Sampur plant is to commence this year while the power generated is to be linked to the national grid in mid 2016.
The Sampur project has been identified as a Strategic Development Project under the purview of Economic Development Minister Basil Rajapaksa where the project would receive many tax exemptions.
Nevertheless, the dilemma faced by the CEB and the Power and Energy Ministry is on completing the Sampur project by 2016 in order to add the much-needed 500MW of power to the national grid in order to meet the increasing demand.
India is to offer a US$ 200 million line of credit to Sri Lanka for the joint venture project.
While discussions continue on the final agreements, Indian officials have expressed confidence in the progress of the Sampur coal plant.
Indian officials say that the Sampur coal power plant project would proceed and would meet the target of 2016 for completion.
Meanwhile, the CEB trade unions have called on the authorities to reveal the agreements reached with the Indian company.
Head of the Lanka Viduli Sevaka Sangamaya, Ranjan Jayalal said that India was pushing the Sri Lankan authorities to enter into an agreement that would be beneficial to the Indians.
“There are so many areas within India that does not have any power. In such a backdrop, the Indians have come forward to help Sri
Lanka constrict a power plant out of love,” a cynical Jayalal said.
He observed that the Indian authorities would try to push the Sri Lankan authorities to agree to the current agreements that would result in the CEB incurring massive losses.
“The UN Human Rights Council sessions in Geneva will be used by the Indians to bulldoze its way with the Sri Lankan authorities,” he added.
Given the sensitivity of the issue, the Sri Lankan government should take steps to reveal the final agreement reached with the Indian authorities before work on the Sampur plant commences, Jayalal noted, adding that the area allocated for the power plant in Sampur has already been demarcated by the Indians as a land that belonged to them.