NTPC’s Lanka project runs into political hurdle

State-run power utility NTPC Ltd’s plan to build a 500 megawatts (MW) plant in Sri Lanka appears to have been been indefinitely delayed, in part because of protests by Tamil Nadu against the Sri Lankan government, according to two company executives.

Another NTPC executive and the Sri Lankan embassy in India, however, blamed technical issues, without elaborating. The original plan was to start generating power from the plant in 2011.

The $500 million power project to be set up as an equal joint venture between NTPC and Sri Lanka’s Ceylon Electricity Board (CEB) is an integral part of India’s attempt to engage Sri Lanka politically and economically at a time when China is becoming increasingly influential in that country.

The plant was to be set up on a build, operate, own and transfer basis and with a debt-to-equity ratio of 70:30. It is NTPC’s first overseas project.

“Everything is ready… (But) there is a perceptible sense that they don’t have the urge to set up this project,” said a top NTPC executive, one of the two mentioned earlier, requesting anonymity. “Sri Lanka has to look beyond Tamil Nadu as India is bigger than that.”

Anti-Sri Lanka sentiment has been running high in Tamil Nadu, a long-time critic of the government in the neighbouring country over the island nation’s treatment of its Tamil minority. This has been exacerbated by the capture of Tamil Nadu fishermen by the Sri Lankan navy for allegedly having strayed across the maritime boundary.

Also, Tamil Nadu chief minister J. Jayalalithaa wrote to Prime Minister Manmohan Singh asking him to send back several Sri Lankan military personnel who were undergoing training in military facilities in the state.
NTPC and CEB signed the joint venture agreement last year. While a detailed feasibility report (DFR), which will form the basis for setting up the project, was submitted to CEB early this year, it is yet to get CEB’s approval.

NTPC signed an agreement with CEB and the Sri Lankan government in December 2006 and the project was initially expected to be commissioned and start generating power in 2011.

“The DFR was prepared and sent to CEB a long time back, around February-March period this year. Since then, many discussions have taken place. The company has been incorporated. The only thing left now after they approve the DFR is to make investment decisions and call for tenders. (But) it seems Tamil Nadu’s protests have a role to play in this delay,” said another senior NTPC executive, who also requested anonymity.

The plant will use around 2.5 million tonnes of coal a year, which may be sourced from Australia and Indonesia and will boost power supply in Sri Lanka, which suffers from an acute power shortage.

Palitha Ganegoda, Sri Lanka’s former deputy high commissioner to India, had earlier admitted that there was a “little bit of tussle” over the project.

While questions emailed to the spokesperson in India’s ministry of external affairs on Tuesday remained unanswered, Mahishini Colonne, Sri Lanka’s deputy high commissioner to India, said, “The delays are not because of what is happening in Tamil Nadu. There are some technical issues that are to be resolved.”

A third NTPC executive also denied that the protest by Tamil Nadu was the reason behind the delay. “There are some technical issues that need to be resolved and a Sri Lankan team is visiting India shortly for the same… We plan to sign everything soon,” the executive said, also declining to be identified.

India voted against Sri Lanka at a human rights meet in Geneva earlier this year because of pressure from the Dravida Munnetra Kazhagam, an ally of the Congress-led United Progressive Alliance government. But the Indian government is also wary of antagonizing the Sri Lankan government, given the increasing involvement of India’s strategic rival China in the Indian Ocean island.

State-owned ONGC Videsh Ltd (OVL) has been making efforts to secure hydrocarbon blocks on a nomination basis in Sri Lanka with the active support of the Indian government.

At the moment, state-owned firms such as OVL are locked in a fierce competition for energy assets with rivals, including China National Petroleum Corp., Sinopec Corp. and CNOOC Ltd.

“It is a strategically very important project for India that is getting stuck in the politics of Tamil Nadu. Given the fact that the Chinese are very active there, it should be expedited,” said Anish De, chief executive at Mercados Asia, an energy consulting firm.

Stressing India’s need for energy security, PricewaterhouseCoopers said in a report released on Wednesday, “India’s spending on oil imports as a percentage of its aggregate GDP (gross domestic product) has increased over the years. The average spending on oil imports as a percentage of the country’s GDP is higher for India as compared to other countries.” (Live Mint)