What went wrong with L & T’s Rajpura Thermal project ?

What went wrong with L & T’s Rajpura Thermal project ?

The move of Larsen and Toubro Ltd (L&T), India’s largest construction and engineering company to sell its 1400 MW Rajpura thermal plant comes as a shock and speaks volumes about the hollowness of the pro industry policies of Punjab Government and working of the Investment Promotion Group.
The official reason for sale of power plant is its plan to divest assets not central to its main businesses, however the actual reasons may be unforeseen day to day problems .Few years ago when L & T made a bid for thermal plant it was very enthuastic about the project.
The projected cost overrun and its failure to get anticipated profits may be among the reason to sell the project even at loss. PSPCL’s inability to take full power generation from this supercritical plant may be one of the reasons. PSPCL will be paying capacity charges only when plant is not running.
PSPCL is forcing L&T to generate power in the range of 600 MW in daytime and reduce it to around 200 MW during night. It is affecting the boiler life very badly as this being a super critical unit, should run on constant load for best performance and economy. The company is losing about Rs. 2.5 crore per day on account of this.
The railway track to the plant is incomplete due to a court case instituted by a farmer at the instigation by an opposition party MLA who never wanted the ruling party to take the credit of development.
The cost of transportation of coal by trucks from Mandi Gobindgarh to the site of plant and non passing of cost of washing of coal are other irritants
L&T has also been facing problems on account of non passing of benefits for declaring it as Mega Project. The reported loss may be to the tune of Rs. 500 crore. Other benefits not granted includes non compensation of cost to the tune of Rs. 50 crore due to change of site to seismic zone ,non compensation of cost amounting to Rs. 178 crore for dedicated railway corridor.
L&T being a professional company is fed up of all these issues emerging out of negative attitudes prevailing in Punjab Government and PSPCL and thus plans to sell the thermal plant at a loss of more than Rs. 2000 crore.
The Rajpura Thermal plant executed at a total cost of around Rs.9, 600 crore may fetch anything between Rs. 7000 crore to 7700 crore as each megawatt can fetch Rs. 5 crore to 5.5 crore in open market. L & T is projecting a loss of Rs. 2000 crore on the sale of project.
A leading Industrialist from Punjab remarked that L&T plan to walk out of Punjab proves that no honest professional group can survive the inefficiency of the state government and PSPCL He said that while industrialists are treated like gods in Madhya Pradesh and Gujarat, they are dragged in Punjab to face red tapes and legal battles. These have contributed to make Trident and Nahar groups to shift their expansion plans to MP.
It may be mentioned that CERC had carried out a comparative analysis of 14 thermal projects in 2010 that had been awarded under competitive bidding. In case of Rajpura thermal the CERC assessed that the cost plus levelised tariff would be Rs 3.4822 per unit as against the bid rate of Rs 2.89 per unit. CERC had assessed the capital cost of Rajpura project as Rs 6862 Crore. This indicates that L&T figure of Rs 9600 Cr is highly inflated and is being publicized so as to fetch a higher sale price for the project.


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7 Responses

  1. Manoj Nirgudkar says:

    One has to address how to handle economics of peak load and base load. Else private sector will not enter into power generation.

  2. Raaj says:

    suprising L T did not learn elmentary lesson
    never trust politiicans and smooth and forcefull sounding chief ministers .
    they are laying honey traps on you

  3. Pravin says:

    It is very regret that, honest industry like L & T. who gives large employment to our nation & it is esteam organization of our nation. facing these type of difficulties. we have high demand of electricity in future. Even though we are not supporting these industry.

  4. Ajit Naik says:

    This is one more instance when L&T has failed in its commitment to the nation.

  5. Gourishankar Pal says:

    You choose Chineese manufacturers over Indian ones (although L & T has a technical collaberation with MHI). All the time govt fogets about the needy fellows who run here & there from office to office seeking for an employment (infact who r ur real bosses “voters”) where incase L & T umbrella shelters more than 65000 families, around 0.325 million common men. Have we all forgotten abt Konkan Railway ! Name a sector where L & T doesn’t have a contribution which has made India proud, so it be arospace or defence. While India is starving for her basic needs to cater the demand of power requirement, govt is still overlooking the credential of L & T. As a common man it is really painful. And am shocked seeing people asking question abt L & T’s commitment.

  6. Nikhar Oza says:

    L&T, regarded and respected as the largest engineering and construction giant conglomerate, does not need to clarify about the “commitments” it has been fulfilling since 1938. Nation’s trust can be seen when a novice trader is advised to go blindly behind L&T shares. Such trust need not to be defended.

  7. Power User says:

    L&T’s foray into Power is one of the most risky decision taken with a challenging government of Congress at the Center. With a dummy minister at work as PM one is faced with lot of issues. L&T facing it this way in Punjab is pathetic.
    What brings in the anger is the incapability of the government shelter and protect its Project. Though Rajpura or Nabha Power as they call it is a Project BOOT by L&T it essentially is property of Punjab State and so of the Nation. If the government of Punjab can not safeguard interest of its own indirectly that of the Nation, what use is it to the common man. Heights of incapability.

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