Reserve Bank of India, has decided to allow the loans to the new Ultra Mega Power Projects (UMPPs) to be considered as secured debt even though the land and other plant assets will be owned by Distribution Utilities not the wining bidder.
As large nos of banks/financial institutions has raised concerns saying loans to the proposed UMPPs would be riskier in the absence of ownership by the borrower.
As per the newly proposed bidding guidelines by Ministry of Power, UMPPs and other such location specific plants will be owned by Distribution Utilities and the bidders will act as contractors for construction the project and operating them for 30 years.
However, the Bidder and Distribution Utilities can jointly mortgage the site and the plant with the banks during the tenure of the loan and post that the same will be transferred to the Distribution Utility for a cost.
Further, the guidelines also sought to make the norms stringent by barring all non-core sector companies from participating in the bidding. Also the Bidder cannot offload more than 51% equity in the project till commissioning of the project against the earlier mandate of 26%.
As per the proposal, bidders with required technical expertise will be asked to submit a fixed charge for the initial year unlike the earlier process of submitting levellised tariff for 25 years. The actual tariff payable to the concessionaire will be revised annually based on a pre-determined index. Fuel cost of the power projects will be passed on to the consumers.
The norms, known as standard bidding documents, will be taken to the cabinet committee on economic affairs for approval and a note has been circulated for consultation. Once approved, the norms will pave way for auction of two ultra mega power projects in Bedhabahal and Surguja in Chhattisgarh that have been put on hold.
The government has so far awarded three ultra mega power projects to Reliance Power and one to Tata Power. Sites for 10 more such projects have been identified in Tamil Nadu, Karnataka,Orissa, Andhra Pradesh, Gujarat, Bihar, Jharkhand and Maharashtra.
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