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Tuesday, November 30, 2021

After tabling white paper on power, Punjab CM Channi announces vigilance probe into PPAs

Finance Minister Manpreet Singh Badal, while speaking on the white paper said that the three private power plants meant a liability of Rs 50,000 crore on the state.

Written by Kanchan Vasdev | Chandigarh |
Updated: November 12, 2021 12:16:12 am
Punjab Chief Minister Charanjit Singh Channi (File)

Punjab Chief Minister Charanjit Singh Channi Thursday a Vigilance Bureau probe into the contentious Power Purchase Agreements (PPAs) entered into by the previous SAD-BJP government and said that responsibility will be fixed for undermining the state’s economy allegedly by personal vested interests. Channi made the announcement after tabling the much anticipated white paper on the state’s power sector.

He said that while it was being said that the three PPAs could not be terminated, his government had given a termination notice to Goindwal Sahib power plant.

The white paper on power sector, from period of 2006-07 to 2020-21, tabled by Punjab government in Punjab Vidhan Sabha indicted the previous SAD-BJP government for excess projection of demand at the time of calculating requirement of additional capacity of electricity in private sector, planning excess generation capacity, commissioning power plants on BOO (Build-Own-Operate) basis, rather than BOT (Build-Operate-Transfer) basis, and most importantly, not keeping a provision for PSPCL to exit from PPAs. It accused the previous regime of paying heavy fixed cost against power surrendered during last seven years among others.

The 9-page white paper was tabled by Chief Minister Channi. Finance Minister Manpreet Singh Badal, while speaking on the white paper said that the three private power plants meant a liability of Rs 50,000 crore on the state.

Former Chief Minister Amarinder Singh had last year promised a White paper on the power sector. But it was never tabled. The draft prepared by the previous government was rejected by Cabinet Ministers Sukhjinder Singh Randhawa and Tript Rajinder Singh Bajwa on the plea that it did not indict the Akalis.

Finally, the white paper was tabled by Channi government now after it prepared the document in a few days time.

Though the party legislators have been demanding that PPAs with the private thermals should be terminated, Channi government has given a termination notice to GVK thermal plant, Goindwal Sahib, but has adopted a middle path with two thermal plants, including NPL Nabha and TSPL Talwandi Sabo, by passing a Bill in Vidhan Sabha to renegotiate PPAs with these two thermals instead of terminating PPAs.

Manpreet Badal said while the Central Regulatory Commission had identified a shortage of 1800 MW for Punjab, the then government entered into PPAs with private companies for 4,000 MW instead. The government also agreed on giving a profit of 16 per cent, and passing off the peak consumption load as average load, and also to provide an interest of 14.5 per cent if the government delayed paying fixed charges.

He said Punjab’s peak load was seen only in four months from July to October when paddy was sown. He also demanded a probe from a sitting judge of High Court into these agreements.

Opposition corners FM

It turned out to be an embarrassment for Manpreet when he was confronted by AAP legislator Aman Arora stating that he was the FM of SAD-BJP government when the PPAs were signed.

Arora said had Manpreet Badal raised a voice then, the state would have been saved of a financial liability of Rs 50,000 crore.

To this, Manpreet retorted and said that he had resigned from SAD in protest against these. He was further confronted by AAP’s rebel MLA Kanwar Sandhu who reminded him that he had resigned on the issue of subsidy and not of PPAs.

Further, when PPCC chief Navjot Singh Sidhu spoke on the PPAs, he said even as the FM had announced to renegotiate the PPAs, they will terminate these PPAs.

What white paper says

Fixed charges liability

The white paper says that a capacity of 100 per cent was contracted throughout the year although peak requirement was seasonal. The rationale behind the guidelines was any additional peak requirement which was for a lesser period (5 months) could be bought from other generators or through exchange. This could have avoided the liability of fixed charges for the whole year.

No exit clause

The PPAs have a format which does not have the provision for
termination by the PSPCL even in case of default by the private plants, while the reverse is not true. Such provisions make these agreements lopsided.

Excess projection of demand

As per the white paper, the 17th EPS survey report made an assumption of demand growth at the rate of 8.75 per cent. Applying the same the peak power demand for the year 2011-12 was calculated to be 11,000 MW which was further extrapolated to 15,385 MW for the year 2015-16, whereas, the actual peak demand in 2015-16 was just 11,917 MW. As such there was a huge difference of 3,468 MW between the projected demand and the actual demand. The thermals were set up based on this projected demand.

Ownership mode changed

As Pachhwara Block, Chhattisgarh, was already allotted to PSEB from which sufficient coal was to be made available for generation of 3000 MW of power for 30-40 years, the Cabinet in September 2006 had given in principle approval for setting up of thermal power plants at Talwandi Sabo and Nabha on BOT (Build, Operate, Transfer) basis to meet with the shortage of power in the state and to fully utilise the coal from Pachhwara Block. PSEB was directed to take requisite steps for obtaining necessary clearances and for setting up of these projects. Later, during SAD-BJP government regime in October 2007 a change in the mode from BOT to BOO was effected.

High GCV of coal assumed

Gross Calorific Value (GCV) of coal is one of the major determinants of variable cost. While floating the tender, this was not clearly defined and resultantly there have been huge variations in figures. PSPCL has to pay extra cost on this account.

Surrendered power cost

With the coming of independent power producers, the share of fixed charges against surrender of power paid to Central Sector as well as own power plants started to rise. In 2014, the fixed cost was Rs 307.20 crore and it went up to Rs 504.37 crore in 2020-21. The state has paid Rs 2,565 crore as fixed cost in these years. Similarly, fixed charges paid to private thermal also increased from Rs 42.06 crore in 2013-14 to Rs 840 crore in 2020-21 fiscal. In 2019-20 fiscal, it was an all-time high at Rs 1,578 crore, says the white paper.

No penalty for default

The availability has been kept same without any consideration of peak and non-peak period. There is no special provision to impose harsh penalty in case of plant’s failure to supply power during the peak paddy season, says the white paper.

Termination notice

According to the white paper, the GVK plant was found the most uneconomical due to high cost and has been issued termination notice on fundamental breach of conditions prescribed in the PPAs. The government may find ways and means to get this power at cheaper rates, it adds.

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