Chennai, Jun 18 (IANS): The 1,600 MW joint venture power project between Tamil Nadu Electricity Board (TNEB) and power equipment maker Bharat Heavy Electricals Ltd (BHEL), planned at Udangudi in Tuticorin district, is expected to be formally scrapped soon, said a senior official of the Tamil Nadu Generation and Distribution Corporation Ltd (Tangedco).

Tangedco is the power generation and distribution state utility owned wholly by TNEB.

"A meeting of the Board of Directors of Udangudi Power Corporation will be called soon to discuss the termination of the joint venture project. The joint venture agreement will be terminated," a senior Tangedco official, preferring anonymity, told IANS.

"Within six months after scrapping of the joint venture agreement, the tender for equipment will be issued. Already, site grading work has been completed. The project will be implemented by TNEB/Tangedco," he said.

Chief Minister J. Jayalalithaa in February announced the cancellation of the Rs.8,000 crore joint venture, citing the lack of progress after a Memorandum of Understanding (MoU) was signed by TNEB and BHEL in 2007.

The state government would fully fund the project, she said, adding that it would be executed by TNEB as a state project with imported coal as it is yet to get the domestic coal linkage and environmental clearance.

As a 26 percent stakeholder in Udangudi Power, BHEL was assured of the equipment order and it had already submitted the technical specification and commercial offer for the two units of 800 MW capacity.

In 2008, TNEB and BHEL floated a joint venture company Udangudi Power Corporation, each taking 26 percent. The balance 48 percent stake was to be contributed by a private player participating in the project or by a financial institution funding the project. The project is yet to get a coal linkage or environmental clearance.

The joint venture partners have invested Rs.32.5 crore each and completed the site levelling activities at the project site.

BHEL does not have much leverage as the project land is yet to be registered in the name of Udangudi Power Corporation, power sector analysts told IANS.

"The project will get the mega power status if implemented by TNEB which, in turn, would be eligible for tax and other concessions. The overall project cost may come down by Rs.900 crore which, in turn, would result in reducing the power cost," the Tangedco official said.

According to BHEL officials, the Tamil Nadu government has not responded to its letters expressing its desire to continue with the joint venture and assuring of early setting up of the project.