Parliamentary panel recommends tariff revision for power plants facing delays

By: |
March 14, 2020 5:30 AM

Out of the 19 under construction thermal plants mentioned above, 14 units comprising 74% of the aforementioned capacity, are owned by NTPC.

About 7,500 MW of such PPAs were part of the spree when NTPC signed PPAs for 21 projects of 40,840 MW in three months before the January, 2011 deadline.About 7,500 MW of such PPAs were part of the spree when NTPC signed PPAs for 21 projects of 40,840 MW in three months before the January, 2011 deadline.

In light of increasing burden of electricity tariffs on financially stressed discoms stemming from delays in construction of power plants, a parliamentary committee on energy wants the revision of power purchase agreements (PPAs) with these plants. There are 19 thermal power plants, under the Central government, where construction delays have raised project costs to Rs 1.99 lakh crore from the initial estimate of Rs 1.87 lakh crore. Similarly, there are 13 hydro power plants being built by central government units, where project expenditure has gone up to Rs 86,698 crore from Rs 50,336 crore due to time overruns in construction.

The parliamentary panel recommended the Union power ministry to ‘make a provision for review of such PPAs, wherein, tariff has been increased owing to cost overrun due to delay in development of a power project’. While observing that ‘the issue of long term PPAs has become a conundrum’, the panel noted that ‘on one hand, there are power generators who insist on honouring of long-term PPAs at any cost as they have made huge investments in their projects while on the other hand, there are discoms who do not want to purchase power at higher rate through long-term PPAs as it is available at much cheaper rate in short term market.”

Revising power tariffs of under construction projects could help a number of hydro power plants see the light of the day as discoms would then find the rates viable and would agree to buy power from such units. On the other hand, revising rates for thermal generating stations will be a negative for NTPC.

Out of the 19 under construction thermal plants mentioned above, 14 units comprising 74% of the aforementioned capacity, are owned by NTPC.

PPAs for more than 70% of NTPC’s coal-based capacity under various stages of construction were signed before 2011, after which it became mandatory for power generators to sign PPAs through bidding. About 7,500 MW of such PPAs were part of the spree when NTPC signed PPAs for 21 projects of 40,840 MW in three months before the January, 2011 deadline.

Some of the major reasons behind delays in power project construction are slow civil works, contractual issues, law & order problem, delay in handing over the units by BHEL, and changes in layout plan. For hydro plants, delays are caused by land acquisition, environment and forest issues, rehabilitation and resettlement issues, natural calamities, geological uncertainties difficult terrain and poor accessibility.

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