Why risks outweigh benefits

The power ministry’s efforts to ease stress in the sector may fall short of expectations because the scheme it has made has more risks than benefits for generators, industry executives say.

On May 1, the central government launched a pilot scheme for procuring 2,500 megawatt (Mw) in aggregate on a competitive basis for three years from generators with commissioned projects but without a power-purchase agreement (PPA).

PFC Consulting (a whollyowned subsidiary of Power Finance Corporation) has been appointed the nodal agency and PTC India the aggregator. Under the scheme, a single entity can be allotted a maximum capacity of 600Mw.

Power industry executives say under the scheme generating companies bear the risks of coal procurement, transmission access, and plan availability requirements. A main concern, power producers say, is that up to 55 per cent of the generating capacity will be purchased.

“The assurance is for just 55 per cent of the capacity. The current industry plant load factor (PLF) for thermal power is in that range. This is not viable for a generator,” said an executive of a private power producer. Not all states might see benefit in participating in this bidding, he added. Rating agency Icra, in its note in April, said distribution utilities might not be willing to procure power beyond ~4.0-4.5 per unit. In

addition, company executives add, the fixed cost payable does not cover up the expenses that would be incurred in generating power beyond the 55 per cent level.

Sanjay Sagar, managing director of Jindal Power, said to maintain the 55 per cent level, power companies should keep 85 per cent of the plant capacity running. “The fixed cost (payable for plant availability) has also been kept at one paisa per unit,” he added.

“The Shakti scheme has a provision for this tender; despite our best efforts they are not willing to float this. In turn, the participation will get restricted to people who have coal linkages but are waiting for a PPA or those who are importing coal,” Sagar added.

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