Desulphurisation tech suppliers seek clarity on ongoing projects

New Delhi: Vendors tasked with deploying flue gas desulphurisation (FGD) units at coal-fired power plants are seeking clarity on the government decision to backtrack on the installation mandate, multiple people aware of the development told ET.

GE, Thermax, Larsen & Toubro (L&T), and Shapoorji Pallonji are among those impacted by the decision and have made submissions to the Centre.

Many vendors, including GE and Thermax, in their representations have urged the government to make its junk FGD mandate prospective, officials aware of the development said.

These vendors want all ongoing projects to complete as per existing contracts.

The government is also said to be evaluating financial implications of completely shuttering ongoing FGD projects.

According to official data, 537 thermal power units with an installed capacity of 204 gigawatt (GW) were identified for the implementation of FGD. Out of this, only 22.59 GW (11%) of coal-based capacity have installed FGDs till now.

A Care Ratings report said FGD contracts were awarded or were under implementation for another 102 GW. "For the remaining around 79 GW of capacity, either the pre-tendering or tendering process was underway," the report said.

The existing desulphurisation projects are estimated to have cost ₹30,000 crore at an average cost of ₹1.40 crore per megawatt (MW). The estimated capital expenditure for FGD across the sector was initially projected to range from ₹1.3 to ₹1.8 lakh crore.

In July this year, however, the Ministry of Environment, Forest, and Climate Change (MOEFCC) diluted the nearly a decade-old mandate to install desulphurisation technology at thermal power plants. It cited fresh studies that found that Indian coal did not emit enough sulphur when burnt for power generation for changing the law.

But this left vendors tasked with installing this equipment in limbo. By industry estimates, the decision effectively drew the curtains on a nearly $30-billion sector.

During deliberations with the Centre, vendor representatives have shared their anxiety of payments stuck with the utilities without any clear end in sight.

"We have requested the government to make the MOEFCC order applicable on FGD projects which may be awarded after the date of issue of notification," representatives from one of the impacted companies told ET.

In July this year, NTPC, the largest power generator in the country, halted FGD work at five plants after government exemption.

The stalling hit Bharat Heavy Electricals Ltd (BHEL), which was working on 7 GW of such projects.