Govt may Tweak PPA Norms to Help Stressed Producers
Likely to scrap rule asking discoms to pay fixed costs even if no power is bought
New Delhi: The government is planning a major change in the power purchase norms to help stressed plants get coal supplies and start generation, as the revised sales pact will make it more attractive for distribution companies to buy electricity from them. The norms are likely to be tweaked to remove the contractual requirement for the buyer to pay a fixed cost to the generation company even if no power is purchased.
This is expected to encourage state distribution companies (discoms) to float tenders and sign new power purchase agreements (PPAs), which, in turn, will help the stranded power stations get fuel supply from Coal India.
In a meeting called by the Union power ministry last Thursday, it was decided to constitute a committee to look into the prospects of power plant developers voluntarily waiving off fixed costs for the discoms that sign PPAs with stressed power plants.
The proposal, however, will mandate the state discoms to buy a minimum capacity of electricity from the plants, a senior government official said.“In a meeting on stressed assets (in the power sector), it was decided to study a mechanism to exempt discoms from paying fixed costs in case they do not offtake the contracted capaci- ty. This is aimed at encouraging states to issue tenders for PPAs,” the official said.
Power plants with a capacity of around 14,000 MW do not have power supply tie-ups, which are mandatory for procuring coal supply from Coal India. The official said that Power Trading Corporation (PTC) has been tasked with submitting a report on the viability and the impact of the proposal in three weeks.
Waiving fixed costs could mean a haircut for lenders and developers, as
fixed charges include return on equity, debt servicing cost and operation and maintenance charges. The variable charges include fuel costs, input costs and transportation costs.