CM revives BPL power project, wins over PM
Jinka Nagaraju, TNN 11 October 2009

HYDERABAD: In a rare gesture of reciprocation, chief minister K Rosaiah won over the heart of Prime Minister Manmohan Singh by issuing a GO to
reinstate the power purchase agreement (PPA) with BPL in the national interest. According to sources, the Prime Minister has been insisting on the revival of the project as it was crucial to improve Indo-Japan bilateral ties as a Japanese company has a stake in BPL.

The state government had cancelled the agreement with BPL as the quoted project cost was too high. But BPL, in which Japan's Marubeni Company has a stake, has been trying for negotiation through the Japanese government ever since. With the Centre being pressured by the Japanese government, the latter has been trying to persuade the state government since 2007 for a renegotiation of the price.

The Andhra Pradesh government finally issued the GO reviving the BPL PPA on Friday, when Manmohan Singh was visiting the state. Sources said this was a thank you gesture to the PM for sanctioning Rs 1,000 crore as flood relief advance.

At the other end, the PM is said to have persuaded BPL for a reduced project cost and increased capacity. The GO issued by the energy department pegged the cost of the project at Rs 4.76 crore per megawatt (MW). In fact, Rosaiah, when he was finance minister, gave his nod to the proposal in November 2007 to revive the 520 MW Ramagundam thermal power plant and give it back to BPL.

As per the revised plan, the capacity of the plant stands increased to 600 MW as against the earlier proposal of 520 MW. According to sources, the state was successful in bringing down the cost from Rs 5.1 crore per megawatt to Rs 4.76 crore on the Centre's advice.

"Negotiations with the Marubeni representatives have been positive. The earlier rates were fixed on the basis of costs in 2004 when the company submitted its PPA first. Though there is cost escalation between then and now, as the government provided land and other facilities, we think the price is reasonable," the source said.

The plant was cancelled by the state government in July 2004 as the company was not able to achieve financial closure even after two extensions. There was widespread opposition to the cost quoted by the company and then Transco CMD Rachel Chatterjee was in the forefront of the opposition.

BPL quoted Rs 5.1 crore per megawatt which was considered by the financier as very high. As the talks to get the price revised could not succeed, the government was forced to scrap the power purchase agreement with the company.