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Opinion divided on renegotiating power pacts with private players

Hindustan Times, Chandigarh | By Gurpreet Singh Nibber, Chandigarh
PUBLISHED ON FEB 18, 2020 11:16 PM IST

A day after chief minister Capt Amarinder Singh announced renegotiation of the power purchase agreements (PPAs) with private thermal power generating companies in the state, the opinion is divided over the practicality of the move.

Power department official said there is very little scope for reworking the PPAs signed with two private players during the previous SAD-BJP government. “The agreements were signed following the laid down procedure by the then government which followed “case–II” template of the Centre under which private companies would make arrangement for fuel and the state government would pay for the coal cost along with other charges, meaning that consumers would have to pay for the net cost of power,” a senior state power department official said, requesting anonymity.

The official said competitive bidding was held through the system of global tenders and no other state government had been able to modify the PPAs to date.

However, advocate general Atul Nanda has a different view. “Nothing is impossible. We will look for a way out of these pacts,” he told HT. The Power department and Punjab State Power Corporation Limited (PSPCL) are still to receive any order from the government regarding the CM’s announcement.

The PPA for 1,980 MW power plant in Mansa was signed with Sterlite Power in 2008 and Larsen and Toubro for 1,400 MW in Rajpura in 2010 for a period of 25 years. Before signing PPAs, two special purpose vehicles (SPVs) – Talwandi Sabo Power Limited and Nabha Power Limited – were created for Mansa and Rajpura projects for carrying out ground work, including land acquisition. After signing of agreements, SPVs were handed over to successful bidders.

Amarinder is under pressure from his ministers, MLAs and other party leaders to renegotiate the PPAs. In the run up to the 2017 assembly elections, the Congress had, in its manifesto, promised to review the pacts to bring down power tariff.

BOX

HOW AGREEMENTS COULD HAVE BEEN BETTER?

•PSPCL officials say the PPAs could have been signed for a period of 7 years, and not for 25 years

•Plants were planned keeping in view peak load requirements during the paddy sowing months instead of annual average demand and, therefore, state government ends up paying thousands of crores as fixed charges even though entire power generated goes unconsumed

•Punjab could have signed pacts on part basis and not on the entire power generated

•Plant capacities were increased without a valid reason. Initially, two plants of 1,000 MW capacity each were to be set up, but later their capacity was increased to 1,980 MW and 1,400 MW

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