80 Private Power Producers Sign Supply Pacts With Oil Psus

More than 50 per cent of the liquid fuel-based units of independent power producers (IPPs) have signed fuel supply agreements (FSA) with public sector oil companies.

According to a senior power ministry official, the Union government has made 80 out of a total of 151 IPPs to sign FSAs.

The deadline for the IPPs to sign FSAs expired on December 31, but some projects like those in Kerala are still hanging fire after the high court directed the state government to reallocate the states quota.

The list of 151 power producers also has those developers who wish to bypass the FSA route. For instance, Reliance is planning to source naphtha from Reliance Petrochemicals while some other producers are planning to source fuel either from Shell, BP or Enron.

 

The Union government had earmarked a total of 12,000 mw of liquid fuel early last year to be allocated to power producers in different states.

The policy was ridden with controversies on two accounts, one over the model fuel supply agreement that was circulated by the Union petroleum ministry and the second over the methodology to be adopted by the states in allocating fuel to projects in their respective states.

The former was more problematic as the banks which fund the projects found the model FSA unbankable.

This forced the Union government to incorporate necessary changes in the draft.

Some of the changes include a back-to-back arrangement between the Railways and the Oil PSUs on the transport of fuel as well a complete guarantee of supply on the quantity of fuel. The government, however, has not allowed IPPs to import fuel without a linkage from the ministry of petroleum and natural gas.

The ministry of power issued a circular to state governments on December 26 to get IPPs to sign their FSA by the December 31, or for those which are sourcing fuel alternately to inform the union ministry of power of their source by the 15th of January.

All these power producers will have to submit their financial closure to the ministry by March 31, 1998.

The failure to do so would result in the cancellation of their linkages.