State-owned thermal power producer NTPC has urged the government to renew the tripartite agreement between state electricity boards (SEBs), the central government and the Reserve Bank of India (RBI) to ensure that payment to the company in lieu of power sold remains secure.
The agreement was signed in 2002 and is due to expire at the end of October 2016. Under the existing agreement, any state defaulting on payments to central power PSUs risks a deduction from its annual transfers from the central government. This clause has not been invoked so far as the threat of a deduction has ensured timely payments by SEBs, even as they are weighed down by R3 lakh crore of accumulated losses.
However, if the payments are not secured this way, then NTPC will stand a chance to sell power to consumers other than the states. “We have asked the government what they want to do. Either way, we have no issues. If we are out of the agreement, we are out of power purchase agreements (PPAs). Then we are not bound by the PPAs with the state and so we can sell (power) to anybody,” NTPC chairman Arup Roy Choudhury said on Wednesday. He, however, added that NTPC provides around 25% of the country’s base load and some sort of payment security mechanism was needed.
The renewal of the agreement becomes important in the context of NTPC’s plan to buy power plants from the state-owned generation companies of Rajasthan and Madhya Pradesh. These plants, even after NTPC acquires them, will continue to sell power to the distribution companies of the respective states. Maharatna has already acquired a 74% stake in Jharkhand’s Patratu thermal plant to modernise it and expand its capacity to 4,000 MW from the existing 840 MW.
“Our average cost of energy is less than R3 (per unit). There is no state which will not line up to buy power at R3 per unit. It is a win-win situation for us. I look at it very positively. If the agreement is extended by the government, it is for the benefit of the government and if it is not,we are free of regulation and free to sell power,” Choudhury, who is due to retire at the end of this month, said.
On the issues of distressed state-owned distribution companies, Choudhury said, is that states should use direct benefit transfer (DBT) for providing financial aid or subsidy to poor using power.
“We have economically weaker people who need (financial) support. Today, technology is providing ways to give that support directly. Why do you want to disturb the tariff?” he suggested.
Under the DBT, the government transfers the subsidy on cooking gas or cereals, or other benefits like pension or scholarships, directly into beneficiary’s bank account.