Power producers flay draft pact on merchant power

The Independent Power Producers Association of India (IPPAI) Friday came out against the government's draft agreement for supply of short term power that was circulated by the power ministry last month seeking comments.

"Who is accountable for possible market failures that may arise from these changes? Why is this being taken up now in the run-up to the national elections," asked Harry Dhaul, director general IPPAI, at a round-table here on the Draft Model Agreement for Supply of Merchant (Short Term) Power on competitive bidding for short-term procurement of electricity by distribution companies (discoms).

Short term power relates to supply agreement for a minimum period of one month and less than three months.

The government had in 2012 notified guidelines for short-term power purchase which are the basis of the draft model agreement circulated last month. These were designed to promote competitive procurement of short-term power requirements, as also to reduce the overall cost of power procurement.

Pointing to the draft agreement clause that requires a supplying generator to have installed capacity of at least twice the generating capacity to be bid, Mahendra Garg, CEO of Reliance Energy Trading Ltd asked: "With such a qualification clause, what happens to small generators and the surplus power of captive power plants?"

"Under the agreement terms proposed, discoms will be restricted from selling surplus power as most of it comes from what are termed as concessional fuel sources," said Gopal Saxena, director BSES Rajdhani Power Ltd.

The short-term power market comprises about 10 percent of the total electricity procured in the country.

Over the last 18 months, however, there have been a spate of trading licence surrenders by companies in the Rs.3,600 crore short-term power market. Less than half of around 45 licensed traders are actively trading in electricity, where the average price of power traded has been falling simultaneously with rising cost of purchase.

The top five traders in terms of market volumes are state-run Power Trading Corp (PTC), JSW Power Trading, Tata Power Trading, NTPC Vidyut Vyapar Nigam and Reliance Energy Trading.