NTPC may sign key pacts with Sri Lanka by end May

New Delhi: Indian State-run power utility NTPC Ltd.’s stalled plan to build a 500 megawatt (MW) plant in Sri Lanka may get going again, with two key agreements likely to be signed by end May.

The project is part of India’s effort to exert economic and strategic influence in the neighbourhood by developing infrastructure. Decks have now been cleared for inking the key accords; the power purchase agreement (PPA) and the implementation agreement.

“The Sri Lanka power deal is about to be signed,” said a senior Indian Government official requesting anonymity.

“A team from Sri Lanka was here some time back. We are in agreement on the agreements. They have agreed and will be getting clearance at their end shortly post which the PPA and the implementation agreement will be signed by next month,” said a senior NTPC executive who also didn’t want to be identified. A second NTPC executive confirmed the development.

While the PPA will be inked between Trincomalee Power Co. Ltd. (the joint venture setting up the project) and Ceylon Electricity Board (CEB), the implementation agreement will be signed between Trincomalee Power and the Government of Sri Lanka.

Mint reported 29 March about the possibility of China wresting power projects away from India in Sri Lanka and Bangladesh.

This follows similar power purchase and implementation agreements signed by NTPC in Bangladesh for the Khulna project.

India’s largest power generation utility had earlier told the CEB that it can’t accept fresh terms proposed by the island nation.

Questions emailed to the spokespersons for India’s External Affairs Ministry, NTPC and the Bangladesh High Commission in New Delhi on 24 April remained unanswered till press time. The Sri Lanka High Commission said questions should be directed to NTPC, “as they are the ones signing the agreement”.

This comes in the backdrop of the Dravida Munnetra Kazhagam (DMK) pulling out of the United Progressive Alliance (UPA) to protest against the coalition Government’s inaction on its demand that India vote against Sri Lanka in the United Nations Human Rights Council hearings in Geneva on 21 March over alleged war crimes.

The original plan was to start generating power from the US$ 500 million Sri Lanka project in 2011. It was to be set up on a build, operate, own and transfer basis with a debt-to-equity ratio of 70:30 and was to be NTPC’s first overseas project.

NTPC and CEB signed the joint venture agreement in 2011. 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.

Neighbourhood ties, traditionally considered strong by India, have been fraying. India’s support for former Maldives President Mohamed Nasheed has seen the current regime regarding it with suspicion. The Indian Ocean atoll nation spans some of the busiest sea lanes connecting Asia, Africa and West Asia.

NTPC signed a joint venture agreement with Bangladesh Power Development Board (BPDB) in January 2012 for the 1,320MW Khulna project for which the power purchase and implementation agreements were signed recently. Another project in Chittagong with an initial capacity of 1,320MW has also been planned by the Bangladesh Government.

“We have signed all the necessary agreements with Bangladesh for the Khulna project. No decision has been taken by the Bangladesh Government for the Chittagong project,” added the NTPC executive quoted above. (Mint.com)