States Ready To Buy Power From Private Producers Ipps Offered
Most of the independent power projects receiving approvals after the eight fast-track projects have managed to get a guaranteed offtake of power produced at a high plant load factor (PLF) and maximum incentive on high generation.
Deals are being finalised for independent power projects based on liquid fuel with capacities ranging from 100 mw to 200 mw in Madhya Pradesh, Karnataka, Andhra Pradesh and Tamil Nadu. The governments of these states have granted the IPPs a guarantee to lift all the power generated up to 85 per cent of PLF. Besides, the IPPs have been granted an incentive of 60 to 70 paise for each unit of energy generated on PLF above 68.5 per cent.
While the Centre guarantees a 16 per cent return to IPPs for generation at 68. 5 per cent PLF, there is a provision for a maximum of 0.7 per cent incentive for generation above 68.5 per cent PLF.
The overall internal rate of return will now be 19 per cent if the generation is allowed to cross 68.5 per cent PLF.
IPPs now negotiating for coal-based power projects are insisting on concessions on similar lines. Several coal-based projects are expected to be cleared soon.
The average tariff for projects based on liquid fuel will be Rs 2.50 a unit at the current level of fuel cost. The actual tariff, however, is sure to be much higher as fuel costs are slated to go up soon.
Some special benefits offered to the eight fast-track projects were: a sovereign guarantee on their dues, a right to demand arbitration in case of a dispute in a third country, freedom to generate up to a maximum PLF of 85 per cent and have the entire generation bought by the state electricity board (SEB) concerned. The additional generation enjoys an incentive of up to 0.7 per cent a unit.
The first two benefits were withdrawn for all IPPs after the fast-track projects got clearance. The state governments and IPPs had been negotiating over higher generation and the incentive on it.
The states were initially reluctant to guarantee purchase of power beyond 68.5 per cent PLF, fearing that they might not need as much energy as the IPPs could offer in the next few years.
The power scenario is sure to improve after a few years when buying power from the high-cost liquid-fuel power plants beyond 68.5 per cent PLF will be unnecessary.
But the IPPs stuck to their guns. A guaranteed offtake of high quantum of power ensuring high PLF was the best guarantee for profitability.
After the states gave in to this demand, the next hurdle was the rate of incentive. The Centre had left it to the states and the IPPs to determine the rate of incentive with a cap of 0.7 per cent. The states finally agreed to an incentive between 0.6 and 0.7 per cent.