Mega Project Ppas Not To Cover Execution

The Union power ministry plans to design power purchase agreements (PPAs) for mega -power projects in such a way that project execution would be delinked from the actual sale and purchase of power.

At a meeting last week, the Standing Independent Group (SIG), constituted by the ministry to formulate the policy and PPA for mega projects, recommended that the PPA for mega-projects be limited to the sale and purchase of power, and that there should be a separate agreement for the construction and execution of projects.

The PPA for mega-power projects, being worked out by the ministry of power and international legal consultants Linklaters & Paines, will involve the sale of power from these projects to the states.

These mega-projects _ above 1000 mw capacity _ will either pit-head stations or will be along the coast.

Till now, all power projects entail the sale of power to only one state and negotiations are carried out on the basis of a single PPA covering project execution, sale and purchase of power, as well as project termination. Even the 4,000 mw CEPA project, the only inter-state private power project, plans to sell power to five states and is negotiating as many PPAs.

However, under the revised policy for mega power projects, the government will come out with one PPA which will have all clearances from the states, including the quantum of power sales.

Power from these projects will be sold to one entity --- called the Power Trading Corporation -- which in turn will sell power to the different states. The SIG feels that as the project would be located in just one state, the agreement to execute the project should be limited to that state and the promoter of the project. The project construction and execution should have not have any link with the sale and purchase of power.

Under the revised policy, the government has also decided to junk the `power bond' route for funding escrow guarantees and deduct dues from defaulting states from their annual plan funds.

Under the proposal mooted by the power ministry, which is expected to be taken up by the Union cabinet soon, the PTC supplying power to state electricity boards would be empowered to recover any outstanding dues from the state government's share of the Central pool.