Cheyyur UMPP will make electricity unaffordable in TN; UMPP Policy Flawed: Report finds

20 May, 2015


CHENNAI: Even as Tamil Nadu contends with rising electricity rates, a new report finds that the 4000 MW coal-fired power plant proposed in Cheyyur is not financially viable as it will place an upward pressure on electricity tariffs in the state. The report concludes that “Ongoing and planned grid and transmission improvements, competitive wind and solar prices, the existing pipeline of power projects in Tamil Nadu and greater resource planning have diminished the need for construction of Plant Cheyyur.”


The report found that the tariff for consumers would be Rs. 4.9 per kWh (unit) in 2021, its first year of operation, and an average tariff of Rs. 5.95 per unit over its 40 year life. Every year of delay will push up costs further. These rates are upto 5 times higher than tariff costs at other UMPPs and coal-fired power plants. The report also points out that all UMPPs are in tariff disputes with state utilities as promoters are finding their original tariff quotes financially unviable.


The Cheyyur project has been a non-starter after 7 private bidders pulled out of competition for the power plant last January terming the proposition unworkable. While the Indian Government has promised to revise the bidding guidelines to make the project more favourable to investors, any such move will only increase the burden on State Electricity Boards, consumers and/or taxpayers.


The report was prepared by US-based Institute of Energy Economics and Financial Analysis for Chennai-based Indian Institute of Public Policy. Equatorials, an Ahmedabad-based financial advisory firm contributed to the report by analysing financial information available in the public domain.


The report was released today at a press conference attended by financial analyst Jai Sharda of Equatorials, and Mr. MG Devasahayam (I.A.S) and former chairman of the Haryana Electricity Board.


For more information, contact:

K. C. Sundaram. Indian Institute of Public Policy. 9940247063


For complete report:

Cheyyur UMPP will make electricity unaffordable in TN; UMPP Policy Flawed: Report finds
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