Model Fuel Transportation Pact For Pvt Power Firms (Ipps) Soon

In a fresh package of policy measures for the power sector, the Union power ministry plans to come out with a standard model agreement for fuel transportation that will overcome the problems faced by independent power producers (IPPs) with the Railways Act.

The ministry also hinted on states being preferred in power distribution.

Speaking at a seminar organised by the Federation of Indian Chambers of Commerce and Industry (Ficci) here yesterday, Union power minister P R Kumaramangalam said the state undertakings were better equipped to take up power distribution vis-a-vis the private sector.

Pradeep Baijal, additional secretary in the ministry, in his address said that the private sector would not be allowed to operate power transmission lines but would only be allowed to build, own and maintain the line.

 

Replying to queries put forward by some promoters on the problems faced by IPPs in entering into a fuel transport contract with the Railways, Kumaramangalam said that he was aware of the problem which was why the government was likely to come out with a standard model. The current Railways Act restrains the Indian Railways from taking up guarantees beyond the value of the goods, while the real loss to an IPP in the event of a default is measured in terms of the power generation lost.

On power distribution, Kumaramangalam cautioned the private sector that the very nature of power distribution in the country was such that only the state had the force as well as the power to take up this operation.

The minister said there were multiple problems in power distribution and did not see the industry being able to cope up with them. Citing the example of Andhra Pradesh where the state government had to call in the Army to ensure law and order, Kumaramangalam said that the private sector could not use the same if it were to increase power tariffs once they take up distribution.

On the mega power projects which the Centre is planning to introduce by the end of the year, the minister said that he would not accept any proposal which offers a power tariff above six cents per unit. On the same note he cautioned the industry that the government could keep a check on any cartel formation which would not allow the projects to be executed at the above rates.

Elaborating on the private sectors role in power transmission, Baijal said that the private sector would be allowed to lease out the transmission lines for operation to the public sector. He said that the government has to take such a measure as transmission business by nature is always a natural monopoly.

Baijal added that this position might change once power regulators came into operation as they would be able to monitor effect changes tariffs in the event of any operator overcharging.

Power transmission is yet to be opened up for privatisation and is expected to be done once the Bill of Transmission is passed by the Parliament. The funds required for power transmission are in the same range as that of power generation which is why the government is seeking private sector funds to bridge the gap.