Centre yet to respond to plea for PPA review

VADODARA: There is no response from the Centre to the Gujarat government’s plea to facilitate renegotations on power purchase agreements with the independent power producers IPPs) in the state. A memorandum containing this and other demands was submitted to Union power minister Suresh Prabhu during his visit to the quake affected areas of Kutch in June 2001.
The absence of such a facility has proved costly for GEB as it has to pay hundreds crores to these IPPs to buy power to meet the needs of various categories of consumers.The review can benefit GEB, argues joint action committee of GEBemployees and engineers association. The Gujarat government had sought a policy decision in the light of the liberalisation scheme of the power sector announced in 1991. The association, however, thinks power to renegotiate PPAs, is vested with the Gujarat government and it should review them on urgent basis. Joint action committee of GEB staff and employees associations had been frequently raising the demand of scrapping of these PPAs saying they were not in the GEB’s financial interest as costly power purchased from the IPPS, is being supplied to the farm sector at subsidy of 50 paise per unit.
The policy envisaged a cost plus approach. Many changes have occurred in the power sector, like restructuring of SEBs and setting up of regulatory bodies. So it has become necessary to renegotiate the PPAs signed earlier to achieve reduction in the power cost. Yet with the basic guidelines remaining unchanged, such review is not likely to be fruitful and that is why Gujarat governmentwantsUnion government to come out with a policy in this regard. The energy cost in Gujarat is higher due to high fuel cost.
The naphtha prices are very volatile and power generation using naphtha has increased the fuel cost to a large extent. The GEB Engineers Association in a plea to the Gujarat Electricity Regulatory Commission before the revision of power tariff last time had said it was necessary to regulate generation by naphtha at the normative plant load factor of 68.5 per cent so as not to burden the consumers. It would be prudent to direct IPPs to use natural gas.
The association said the adverse effects of PPAs are clearly visible and felt now.