The Financial Express

Rental power plants -- for how long?  

| Updated: February 20, 2021 23:06:18

Rental power plants -- for how long?   

The reported move by the government to extend the tenure of rental power plants hardly appears to be reasonable. Most observers think that the move, if already firmed up, is most likely to trigger severe criticism for the simple reason that the rental plants, run by huge government subsidy, have already outlived the purpose they were originally meant to serve, and so repeated extensions benefit only a few at the expense of the taxpayers.

Rental power plants did sound good when they first hit the public domain in 2009. Power generation in the country was in a shambles. Something had to be done, and as an interim measure QRPP (Quick Rental Power Plants) looked to be an immediate remedy despite the high cost implications. There were criticisms within the country branding it a 'quick' device for 'quick' money. However, it did not seem to pose itself threatening enough in terms of the money spent on them. But in a span of little over two years, the shockwaves had begun to be felt. And those are too jarring to ignore.

The government as part of its Crash Programme in October 2009 undertook to set up power generation plants having a total capacity of 7,000 MW in the next five years. Thus the rental, quick rental and peaking plants made their appearance to address the nagging power crisis. The projects were supposed to add about 2,000 MWs of electricity to the national grid. Since these were floated as an emergency measure, it was expected that these would be discontinued in three to five years. The government, too, promised to replace the plants as soon as the immediate need for power is met. But as things stood, the government continued to allow setting up of rental power plants until 2020 while simultaneously renewing contracts with most of the old plants. In November 2020, the cabinet committee on government purchases extended the tenure of the 35.5MW rental power plant in Bhola by two more years, and another proposal for the extension of the 50MW gas-based Kumargaon Rental Power Plant in Sylhet by one more year is under consideration. Tenure of this project has already been extended thrice.

There are 26 rental power plants in operation, generating more than 2,000MW of electricity. The money spent is astronomical. The government has to pay staggering amounts as monthly rent for each megawatt of electricity produced to the power plants on account of capacity building charge. Besides, they are provided with fuel at subsidised rate and the end product is purchased at an exorbitant price. The situation is so precarious that the government has to approach the donors for loans to help meet the costs, which everyone knows come with a heavy price. One such is the Extended Credit Facility (ECF) fund of the IMF that the government has resorted to. The ever escalating costs of the oil-based rental plants and the booming oil import bills that the government has to bear are so strikingly at odds that continuing with the white elephants makes no sense, to say the least.


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