The Confederation of Indian Industry (CII), the Federation of Indian Chambers of Commerce and Industry (Ficci), the Associated Chambers of Commerce and Industry of India (Assocham) and the Association of Power Producers (APP) have joined hands to oppose the model power purchase agreement (PPA) for generation projects released by the power ministry last month.
To present their case, these entities have sought a meeting with Power Minister Veerappa Moily.
APP director-general Ashok Khurana told Business Standard that “Though the concept of fuel pass-through has been partially included in the model PPA, the overall structure of the PPA has been changed and it is evident many provisions completely change the balance of risk in the development of power projects. In a sector that faces major and intractable problems relating to fuel and credit worthiness of the distribution utilities, the proposed PPA would only add to contract failures and deter investments in the sector.”
He added the inequitable allocation of fuel availability, the pricing risks and the absence of a provision to handle changes in laws in countries from where coal was sourced were major concerns. He also cited the lack of a provision to reopen contracts by procurers, as well as generators, as a hurdle.
Khurana said the chambers felt the design-finance-build-operate-transfer (DFBOT) framework proposed in the model PPA required developers to bring in finance, technology, operating skills, a part of fuel and a host of other inputs. However, it later reduced the status of a developer to that of a build-operate-transfer contractor.
“While such a framework might be suitable for a tolling plant, it needs to be kept in mind power projects under the competitive bidding structure have risk profiles different from the public private participation model in the traditional sense. The DFBOT framework affects the ability of banks to finance the project,” he added.
The DFBOT model, Khurana added, also created an overarching role for independent engineers. The additional reviews, inspections and approvals lead to delays, he said.