Chennai: The proposed 4,000 MW ultra mega power project (UMPP) in Cheyyur, if built is a financial disaster for consumers, Tangedco and the state government, a report of the Institute for Energy Economics and Financial Analysis (IEEFA), released on Wednesday, said.
The report assessed tariff rates and risks associated with the project after the central government proposed revised bidding guidelines to make the project more attractive in response to the withdrawal of prospective bidders who said it was too risky.
The fuel-cost pass-through will expose consumers and the state electricity board to tariff volatility. Any future increase in the coal cess would add on to this volatility, the report said.
Moreover, the uncertainty over land acquisition will deter investors. It also estimates that electricity from the power plant will have a levelised cost of Rs 5.93 per unit, far higher than average cost of coal-based electricity.
“Seen together with state’s indebtedness, Tangedco's hopeless financial situation and the political culture of extending freebies and heavily subsidised electricity, Cheyyur project's expensive electricity will worsen the state's financial situation,” said S. Gandhi, former TNEB engineer and president of Power Engineers' Society.
