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

The Economic Times - - Companies: Pursuit Of Profit - Sarita.Singh@ times­

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.

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