DPC in arbitration tangle

DPC has initiated arbitration proceedings against GoI for not honouring the provisions of the counter guarantee provisions. It has been arguing that GoI should have paid arrears of monthly power bills and interest thereon as MSEB failed to do so and later disputed these payments.

Since May 1999, MSEB was making capacity payments to DPC in accordance with Schedule 9 of the power purchase agreement (PPA). It has cancelled its PPA with DPC since May 23, 2001 on grounds of material misrepresentation and default on the availability of power. However, DPC has strongly objected to MSEB’s move.

DPC is of the view that MSEB was entitled to pay Rs 103.89 crore towards December 2000 bill, Rs 127.51 crore for January 2001 bill. Meanwhile, MSEB slapped a rebate of Rs 400 crore as DPC failed to supply power within the stipulated time period during October 2000 and January 28, 2001.

During the second fourth month period of the peak season there were two more shortfalls consequent to cold starts on February 13 and March 29, 2001. Moreover, there were also four shortfalls consequent to hot starts in the second period on April 23, May 3, May 16 and May 17, 2001.

MSEB argued that DPC has been wrongfully billing MSEB for capacity payments under the PPA, even though the power station constructed did not have the operating characteristics and dynamic parameters that were described in the PPA.

Since the power station was commissioned by DPC in May 1999, MSEB has paid DPC until April 2001 an aggregate of Rs 3,499 crore, of which about Rs 2,087 crore pertains to capacity charges. It has petitioned that it is entitled to damages and refund of Rs 1,200 crore in respect of excess payment made to DPC in relation to capacity charges.