Higher tariff in 2nd auction for mid-term PPA auction positive for power producers, says ICRA

The power ministry's second auction for procuring 2.5 GW of thermal power in medium term at a higher tariff of Rs 4.41 per unit compared to Rs 4.24 per unit in the first round is positive for power producers, but signing of sale agreements with discoms remains crucial, ICRA said on Thursday.

The completion of the second round of medium-term power purchase agreement (PPA) auctions along with the slightly higher tariffs discovered is positive for the independent power producers (IPPs), the rating agency said in a statement.

The government had brought this scheme last year in April to give relief to those coal-fired power plants which were operational but starving for coal in a the absence of any PPA with discoms. The PPA is a prerequisite for getting fuel linkage or supply under the existing legal framework.

The Ministry of Power recently completed the reverse auction under the second scheme for procurement of 2.5 GW from operational coal-based power projects having no power purchase agreements for a period of three years.

It said the lowest quoted tariff under this scheme was at Rs 4.41 per unit, which is slightly higher than the Rs 4.24 per unit discovered in the first medium-term PPA scheme, wherein 1.9 GW was tied up.

Commenting on the auction, Sabyasachi Majumdar, Group Head - Corporate ratings, ICRA Ltd, said, "The tariff discovered is largely in line with the cost of generation for a recently commissioned coal-based power project having capital cost of Rs 7.0 crore to 7.5 crore per MW and with part availability of coal under long-term domestic linkage."