Lockdown to cause time and cost overrun for 6k crore hydroproject in Sikkim

Ongoing lockdown is going to significantly push up time and cost needed for the completion of 500MW ‘Teesta VI’ Hydropower project of NHPC Limited in Himalayan state Sikkim. The escalation may also cause an impact on tariff structure of the project output.

“The lockdown is there on a greater cause. But it has put this near 6 k crore project under an unusual situation,” said D. Chattopadhyay, Executive Director, NHPC Limited.

According to him, the contract for large portion of civil works have already been awarded to the contractors with a targeted time frame for the work. The lockdown may cause difficulty in maintaining the time frame. In this case however, none of the two parties, NHPC or the contractors, will have to pay any financial compensation for this delay to the other.

But, “With the delay in execution, cost of materials and instrumentation will go up significantly. In addition, the load of IDC (Interest During Construction) of the money borrowed by NHPC from financial institutions will also go up. For a big project like Teesta VI, it is quite high. Both put together will push up project cost causing impact on the final tariff of its output,” said Chattopadhyay.

As the system goes, statutory body CERC (Central Electricity Regulatory Commission) regulates output tariff of most of the generating companies after considering various factors including project cost of an installation. Based upon the approach of generating companies, CERC allows annual tariff structure for a block of 5 years.

Following approval of National Company Law Tribunal (NCLT) Hyderabad bench in July 2019, NHPC took over the project from debt-ridden Lanco Teesta Hydro Power Ltd (LTHPL) with an acquisition fee of Rs 897.5 Crore. The total estimated project cost is 5748.4 crore including the acquisition fee. The targeted projected completion time for the project is 5 years.

ET News
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