Panel Verdict On Power Purchase Agreements To Be Binding

The government has decided to give unprecedented powers to the high powered board constituted to resolve outstanding issues concerning power purchase agreements (PPAs) of fast-track projects in order to expedite the issue of counter-guarantees.

The proposal has already been approved by the power ministry and the Prime Minister. It is due to be placed before the cabinet.

The cabinet secretary is the chairman of the board, whose members include power, finance, banking, environment & forest, industrial development, technical development and Planning Commission secretaries, besides the Central Electricity Authority chairman.

The cabinet note says that in order to finalise the issue of counter-guarantees to the fast-track power projects, it is proposed that after the approval by the cabinet to the issue of counter-guarantee, any outstanding issues, or any other minor issues arising at the time of finalisation of the power purchase agreements or at the time of issue of counter-guarantee, may be referred to the high powered board which would be authorised to take the final decision.

 

The note further says that on issues, primarily financial in nature, like those related to income-tax, the board may be asked to seek a final decision of the finance minister.

So far, the power ministry has been referring all the unresolved issues related to PPAs of the power projects to the high powered board. After considering all aspects of these issues, the board has been making specific recommendations to the cabinet.

Based on these recommendations, the cabinet has been taking appropriate decisions and approving the issue of counter-guarantee.

The power purchase agreements are then re-drafted according to the decisions taken in the inter-ministerial committee, the board and the cabinet.

As the power purchase agreements is a complex document and its various provisions are inter-linked, re-drafting certain provisions frequently involves re-drafting of the inter-linked provisions. In the process, certain new issues come up which need to be resolved before the power purchase agreements can be finalised.

These can result in the issues being brought before the high powered board and the cabinet again, delaying the issue of the counter-guarantee.

The delegation of new powers to the board is expected to reduce these delays and expedite the issue of counter-guarantees.

guarantee, any outstanding issues, or any other minor issues arising at the time of finalisation of the PPA or at the time of issue of counter-guarantee, may be referred to the high powered board which would be authorised to take the final decision.

The note further says that on issues, primarily financial in nature, like those related to income-tax, the board may be asked to seek a final decision of the finance minister.

So far, the power ministry has been referring all the unresolved issues related to PPAs of the power projects to the high powered board. After considering all aspects of these issues, the board has been making specific recommendations to the cabinet.

Based on these recommendations, the cabinet has been taking appropriate decisions and approving the issue of counter-guarantee. The PPAs are then re-drafted according to the decisions taken in the inter-ministerial committee, the board and the cabinet.

As the PPA is a complex document and its various provisions are inter-linked, re-drafting certain provisions frequently involves re-drafting of the inter-linked provisions. In the process, certain new issues come up which need to be resolved before the PPA can be finalised. These can result in the issues being brought before the high powered board and the cabinet again, delaying the issue of the counter-guarantee.

The delegation of new powers to the board is expected to reduce these delays and expedite the issue of counter-guarantees.