MSEB Not To Terminate PPAs With RPPL, Cipco For Now

Mumbai, January 27: | Updated: Jan 28 2003, 05:30am hrs
The Maharashtra State Electricity Board (MSEB), headed by the newly- appointed chairman Asoke Basak on Monday, took a decision not to serve notices for the termination of power purchase agreements (PPAs) to Reliance Patalganga Power Company (RPPL) and Ispat promoted Central India Power Company (Cipco) nor issue fresh no objection certificates for their power projects till the passage of Electricity Bill 2002.

Similay, the MSEBs board, which is under attack for zero capacity addition on its own during the 10th plan and also for the daily load-shedding of around 2,000 mw, on Monday arrived at a decision that these two projects would continue to be put on the hold status.

MSEB sources told FE that the decision in this regard was taken as the Electricity Bill 2002, the report on which was presented in Parliament in third week of December by the Parliamentary Standing Committee on energy, envisages a deregulation of power generation and allowing the generator to sell the power to anyone.

The Committee, in its report, has called for the exemption of bilateral contracts between generators and bulk purchases from the purview of regulatory authorities. It has recommended that to facilitate this, the government should consider for inclusion in the Electricity Bill 2002 a provision to ensure that where rates for sale or purchase of electricity were mutually agreed between a generating company and a bulk purchaser, being a distribution licensee or a direct consumer, such rates would be excluded from the purview of tariff determination by the Appropriate Commission. The Committee has also suggested that generation tariff excluding sale to a distribution licensee under long-term agreement may not be determined by the Regulatory Commission.

It must be mentioned that MSEB, during the chairmanship of AK Mago, had called for an issuance of termination notice to RPPL and CIPCO on the grounds that financial closure for the 447 mw-Patalganga and 1,082-Bhadravati projects had not taken place. The previous MSEB board had called for issuing the termination notice under the clause 3.4 of the PPA to RPPL and under clause 2.5.1 of the PPA to CIPCO. MSEB had inked its PPA with RPPL on August 3, 1996 and subsequently amended it on February 4, 2000. In case of Bhadravati project, MSEB had signed its PPA with CIPCO on August 3, 1998.

These two projects had been put on the hold since June 2001 till the base power demand in the state picks up. Sources said that MSEB had decided not to pursue the implementation of these two as it had estimated its cumulative monthly payment of Rs 890 crore for Patalganga during 2003-04 and Rs 1,210 crore for Bhadravati during 2005-06.