KM Birla to refire Rosa Power in UP

Singh also said all clearances have been obtained for Reliance Energy’s Dadri project, and work should begin in ‘‘two-three months’’. He said the state was in ‘‘advanced negotiations’’ with the Tata Group to set up a power plant in eastern UP.

The power purchase agreement (PPA) for the coal-fired 600 MW Rosa project has been finalised with the Uttar Pradesh Power Corp Ltd, and will be inked after the UP Cabinet gives its nod this week. Detailed terms of the PPA — as well as source of coal — are not yet known.

‘‘It is important that the PPA, water supply agreement and the revised implementation agreement, which were finalised with the UP government be signed by both parties before October 31 to enable us to place EPC (engineering, procurement & construction) contract before December 31, 2005, and achieve financial closure of the project by March 31, 2006,’’ Birla has written to chairman of UPDC, Amar Singh.

The urgency, according to Birla, is driven by pricing pressures. ‘‘We have with great persuasion convinced the EPC contractor to hold the price up to December 2005 despite the increase in the input prices such as steel and cement,’’ his letter adds.

Singh says the project will be upstream in two-and-a-half years. ‘‘Yes, the power situation is bad. But we are not doing lip-service,’’ he says. The state has an installed capacity of 4,410 MW and also buys power from other states to meet its demand, which is in the region of 5,000 MW per day as per October 1, 2005.

The Rosa Power Project, initially a 51:49 joint venture between the A.V. Birla Group and PowerGen of UK, was initiated in the early 1990s. Earlier estimates had pegged the project’s total cost at Rs 2,603 crore with a debt component of Rs 1,814 crore and equity of Rs 789 crore.

In fact, the project’s promoters got a techno-economic clearance as far back as in 1998. The project, however, did not kick off due to lack of a proper payment security mechanism.

According to CMIE, UP attracted Rs 19,800 crore in proposed and announced investments for 2004. Besides power, the sugar sector has seen investments after delicensing in 2004. The legal challenge to delicensing currently rests with the Supreme Court.

However, as a World Bank report on India’s investment climate points out, Uttar Pradesh’s business environment needs a major overhaul. It takes 75 days to register property in UP as opposed to 35 days in Karnataka; it takes 1,165 days to enforce a contract vis-a-vis 425 days in Maharashtra; and it takes 15 years to go through bankcruptcy proceedings versus 8 years in Karnataka.

‘‘The report is not incorrect,’’ says Singh. ‘‘It’s not conducive for business.’’ He says the UP State Investment Board meets every month to try and tackle any unresolved issue.