CAG picks holes in Odisha?s power pacts, says it favours private operators

The Odisha government?s power purchase agreements (PPAs) with independent power producers(IPPs) are heavily loaded in favour of private generators. This is what the Comptroller and Auditor General (CAG) of India has said in its latest report submitted in the state assembly early this week.

The CAG, while auditing the performance of the state-owned Gridco, the sole bulk power supplier of Odisha, found deficiencies in the PPAs with the IPPs.

?Gridco failed to execute PPAs with the IPPs through competitive bidding route in compliance with the legal framework and their operationalisation was ineffective,? said the Odisha accountant general, Amar Patnaik. Gridco entered into PPAs with the 29 MoU-based IPPs and two non-MoU IPPs, including Sterlite Energy, GMR Energy, and Arati Steel.

As per the PPAs, the total installed capacity of 31 IPPs was 39,010 MW which included Odisha’s share of 6621MW. In addition to this, the company also signed 16 PPAs with Central/State utilities with installed capacity of 26,020 MW with Odisha’s share of 8519MW in the upcoming projects.

Given the PPAs signed with the IPPs, the total availability of power to Gridco for the state will be 18,986 MW as against the state?s projected demand of power by 2016-17 is 6362 MW.

However, CAG said that PPAs signed with the IPPs did not have any stipulation for enabling Gridco to trade the surplus power beyond the state share. Thus, absence of enabling clause in the PPAs resulted in foregoing benefit of earning potential revenue towards which was crucial for the company, observed the CAG.

On the other hand, at least five IPPs had already signed agreement with other inter-state traders for third party sale of power. The national auditor has pointed out that the Gridco had signed the PPA on cost based tariff although it had the opportunity to have a competitive bidding tariff.

The Electricity Act 2003(EA 2003) and National Tariff Policy (NTP)provide for determining tariff through transparent competitive bidding mechanism . NTP, however, allows cost-based tariff upto September 30, 2006 subject to fulfillment of condition of completion of financial closure by IPPs.