CHAPTER 7

TECHNO-ECONOMIC APPRAISAL/ CONCURRENCE OF POWER

DEVELOPMENT SCHEMES

The Central Electricity Authority is
responsible for concurrence of hydro power
development schemes of central, state and
private sectors after enactment of the
Electricity Act, 2003 in June, 2003. Hydro
scheme of an Electricity Board or
Generating Company estimated to involve
capital expenditure exceeding such sum, as
may be fixed by the Central Govt, from time
to time by notification in the official
Gazette, is required to be submitted to the
Central Electricity Authority for its
concurrence as per provisions of Section 8
of The Electricity Act, 2003.

The Government of India vide
various notifications had fixed the limits of
capital expenditure for the various power
schemes beyond which CEAs concurrence
was required. The limits in respect of Hydro
electric stations are given below:

in relation to a scheme prepared by a
generating company, not wholly or
partly owned by the Central Government
or any State Government, for supply of
power to more than one State, and
approved in accordance with a scheme
proposed by any committee or body
authorized by the Central Government in
this regard, Rupees twenty thousand
crores;
in relation to a scheme for hydro electric
station prepared by a Generating
Company selected through a process of
competitive bidding by the competent
Govt. or Govts., Rupees one thousand
crores.
in relation to a scheme for generating
station prepared by a Generating
Company, where the power generated is
primarily for captive consumption for an
industry or a group of industries and sale
of power, if any, to the Board, does not
exceed fifty per cent of the total installed
capacity of the power station, Rupees
three thousand crores.
in relation to a scheme for a generating
station prepared by a Generating
Company whose tariff for sale of
electricity is determined by the Central
Electricity Regulatory Commission or
any State Electricity Regulatory
Commission, rupees two thousand five
hundred crores.

in relation to all other schemes, Rupees
two hundred and fifty crores.

All hydroelectric schemes utilizing
waters of inter-state rivers shall be submitted
to the authority for its concurrence. After
the enactment of Electricity Act, 2003, the
limits of capital expenditure for hydro power
schemes continue to remain the same as
listed above.

7.1 Techno-Economic Clearance/
Appraisal of Schemes

During the year 2004-05, CEA had
appraised and accorded clearance to 5 Nos.
Hydro Generation schemes aggregating to
1387 MW capacity with a financial
investment of Rs. 6317.31 Crores. Details of
these schemes are given at Annexure7A.

7.1.1 Reduction in Cost of Power
Generation Projects:

It has been observed that in most of
the cases, the cost estimates indicated by the
project proponents in their Detailed Project
Report (DPR) are on the higher side due to
various reasons. On receipt of the DPR, the
same is thoroughly scrutinized by the
various appraisal divisions of CEA. Before
the proposal is considered by CEA for
Techno - economic clearance/ techno -
economic appraisal, it is first considered by
the Standing Project Appraisal Committee
(SPAC) chaired by Member (Planning), co-
chaired by Member (E&C) with Member

(Hydro) as special invitee and having Chief
Engineers of various specialized appraisal
divisions as its members. The project
features and cost estimates etc. are discussed
in detail by the appraisal divisions with
representatives of project authorities, State
Electricity Boards and State Government
etc. The estimated cost arrived at based on
these discussions is recommended to the
Authority for accord of techno-economic
clearance (TEC) /techno-economic appraisal
(TEA).

During the year 2004-05, five (5)
hydro power projects aggregating to 1387
MW capacity were accorded techno-
economic clearance/ appraisal and net
reduction in the cost achieved for these
projects comes out to about Rs. 1191.25
Crores as detailed in Annexure7A.

7.1.2 Reduction in Soft Cost (All
Regions)

DPRs are received in CEA for
accord of TEC for various power projects.
The DPRs are scrutinized and detailed
examination of the financial package for
financing of the projects are done with
reference to the reasonableness of sources of
finance, interest rate, D/E ratio, promoters
contribution, financing charges etc. The
examination of soft cost i.e. IDC and FC, is
done to reduce and optimize the soft cost
which results in reduction of the project cost
vis--vis the tariff.

Reduction of the order of Rs.434.68
Crores was achieved in the soft cost of
schemes/ proposals techno-economically
cleared by CEA during the year 2004-05 as
shown in Annexure No. 7B. This reduction
is 33.71% of the soft cost proposed by the
project Authorities in their DPRs.

7.1.3 According of Transfer of TEC of
Hydro Electric Schemes

TEC of 3 nos. of hydro electric
schemes aggregating to 684 MW capacities
have been transferred to other implementing
agencies by CEA during the year 2004-05.
Details of these schemes are given at
Annexure 7C.

7.1.4 Completion cost of IPP Projects in
the State of Tamil Nadu

TEC is accorded by CEA based on
tentative financial packages. Subsequently
the promoters, after completion of the
project, are required to submit the details of
the completion cost and their corresponding
final financial packages for financing of the
project. Detailed examination and detailed
tariff studies are done to ensure that the final
financial packages are not inferior to the
tentative financial packages approved by
CEA at the time of TEC.

In the year, the completed cost and
the final financial package sent by the IPPs
in respect of following IPP Projects in Tamil
Nadu was examined, and comments/advice
were given to the Tamil Nadu State
Electricity Board.

i) Samalpatti DGPP (106 MW) by M/s.
Samalpatti Power Co. Pvt. Ltd.
ii) Samayanallur DGPP (106 MW) by
M/s. Madurai Power Corpn. Pvt. Ltd.
iii) Neyveli zero unit TPS (1x250 MW)
by M/s. ST-CMS Electric Co. (P)
Ltd.







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