By 2004, 8,000 mw of power will be generated by mega projects’

It is true that though steps to reform the private sector were started in 1991, problems have persisted and very meagre progress has been made till date. In the privatesector the result has been even worse. It is to rectify this situation that the PTC has been created. Though it may seem that it is just an addition of another public enterprise, in reality it is not so. PTC has been created to set right the problems which have been plaguing the power sector in India. For instance, an independent power producer (IPP) has to contend with a host of problems due to interaction with various agencies for clearances and entering into multiple power purchase agreement (PPA).

Through PTC we are trying to provide a single-window clearance in the power sector. IPPs will now have to enter into PPA arrangements only with PTC and the sale of power will also be only to PTC. Payments to developers will also be made by PTC. So all problems relating to escrow accounts, letter of credits, guarantee for defaults by state electricity boards etc will be borne by the PTC and IPPs will not have to bother on these fronts.

Since PTC will only be dealing with mega power projects which are projectsof 1000-1500 mw in thermal and 500 mw and above in hydel, they will be multi-state projects, ie, supply power to more than one state. Thus a lot of problems will get solved.

All this sounds fine in theory, but the real problem lies in application. If SEBs have failed, what’s the guarantee that PTC will function viably. Why should the IPPs who have no faith in SEBs trust the PTC which will also be a government body?

The PTC will be functioning in a totally different milieu. For its functioning, there will be regulatory commissions, reformed SEBs, reformed tariffs etc, so I do not see any reason why it will not work. In fact, it is going to be the first major step towards change in the power sector.

You have been maintaining that the sale of power through the PTC will ensure cheap power to the consumers. What’s the basis for this since the PPAs have a well defined clause making all costs a pass through item, which will go on to add to the cost of power. How do you explain this?

As I havesaid, PTC will only involve itself with mega power projects. The government has given a number of concessions to the developers of mega projects duty-free import of all equipment, income tax concession for 10 years in the block of 15 years. Further, even state governments will not levy sales tax etc on them. These concessions will keep the generation cost low, so obviously the power tariffs will also be on the lower side. Plus we should not forget that the whole PTC operation will be only in reformed states with regulatory commissions in place, so tariffs will be quite rational.

But how can PTC state that tariffs will be low when the powers to fix tariffs is not with it, but with the regulatory commissions? This might create confusion…

We have had a dialogue with the Central Electricity Regulatory Commission (CERC) and after the required clearances, only we are going ahead. The tariff fixation for power sector will not be similar to the telecom sector with either ceilings or floor rates.

Thetariffs will vary from project to project. Meaning that since for mega power projects various concessions have been given by the government, the CERC will take this into account while fixing tariffs for power generated from these projects.

Similarly, for non-mega projects, the CERC will take into consideration the costs incurred there. The tariff of power generated from these two categories of projects will not be same. Thus, power from mega projects is going to be cheaper in comparison.

But won’t this mean having two or more than two systems operating at the same time? While mega projects will be there, there will also be non-mega projects selling power. How many system and rates will be there at a given time?

You are right. This kind of scenario is quite possible, that’s why a number of IPPs are approaching us for sale of their power via the PTC. But at this point we can’t do anything since the mandate by the Cabinet to us is only for dealing with mega projects. Maybe it gets enlarged at somepoint of time to include others, but I am not sure that’s a policy decision for the Ministry of Power to take.

Since PTC is to act as a buffer between the IPPs and the state governments, it is imperative that the latter’s consent is obtained. What’s the progress on this front?

Initially, there were reservations. But now all of them have agreed to the creation of PTC because they understand the advantages. However, problem regarding guaranteeing payments still persists. The mechanism we are trying to put up is that if any state government defaults in payments to the PTC, the payment be made by appropriation in its Central Plan allocation. Here the state governments are not agreeing and talks are on.

By when will the whole concept start functioning?

By 2004 everything will be in place. The mega projects will start generating power. PTC will actively start trading. Regulatory commissions will be in place and cheap power will be available. About 7-8,000 mw of power will be generated by themega projects by then.