Post coal auctions, IPPs not keen to offer power at variable cost

Independent power producers (IPPS) that have inked memorandum of understanding (MoU) with the state government are no longer keen to provide power to the state grid at variable cost.

As per the MoUs, the IPPs are mandated to offer 12-14% of the total generated power as state share at a variable cost. Presently, power procured from IPPs like Sterlite Energy and GMR Energy comes in the price range of Rs 2.5-3 per unit. 

However, state owned bulk power purchaser Gridco has to fork out a higher price (nearly Rs 4.50 per unit) when it buys power from power stations of NTPC located outside the state.

"In the power purchase agreements (PPAs) signed with Gridco, the IPPs are committed to supply power at a variable cost. But of late, the IPPs through their association, have submitted a representation to the state government that they are no longer in a position to provide power at variable cost. 

The IPPs have cited that they have to spend huge sums to win coal blocks via the auction route and this was bound to escalate cost of power generation", said a government official.

Confirming the development, a senior official of an IPP said, "We have submitted a proposal to the government, explaining our difficulty in supplying power at variable cost. If we continue to supply power at that cost in the post coal auction regime, it is bound to impact viability of our operations."

Chief secretary G C Pati is scheduled to take a meeting on the matter on April 23.

The state government has inked MoUs with 28 IPPs envisaging a total production capacity of around 37,000 Mw with proposed investment of over Rs one lakh crore. Of this, investments worth Rs 35,000 crore have already been grounded by IPPs.

Three IPPs- Vedanta Group firm Sesa Sterlite, GMR Kamalanga and Jindal India Thermal Power Ltd (JITPL) have commenced commercial production.

Sesa Sterlite has fully commissioned its 2400 Mw (4x600) power project at Bhurkamunda near Jharsuguda. The company has invested Rs 8038 crore on the plant.

GMR Kamalanga has commissioned three 350 Mw units of its proposed 1400 Mw power plant at Kamalanga in Dhenkanal district. It has invested Rs 5590 crore.

JITPL has put on stream the first 600 Mw unit of its proposed 1800 Mw plant, at Derang near Angul. Others like Ind-Barath Energy Utkal Ltd and Monnet Power were in the advanced stage of commissioning their projects.