Government To Procure 2500 MW Power Without Power Purchase Agreements

Power generating firms can now sell power without binding pacts as the government looks to revive stressed power assets.

The Centre launched a pilot scheme for procurement of aggregate power of 2,500 megawatts on competitive basis for three years under medium term, that is from generators with commissioned projects but without power purchase agreements, the power ministry said in a notification today. The guidelines for the scheme were released earlier this month.

PFC Consulting Ltd, a wholly owned subsidiary of PFC Ltd., has been appointed as the nodal agency for the bidding process while PTC India Ltd. is the aggregator, Power Finance Corporation said in a separate statement.

As part of the bidding process, PFC Consolting will invite quotations from power developers in the form of single lump-sum tariff. A single developer can bid for a minimum capacity of 100 MW and a maximum capacity of 600 MW, the ministry notification added. The scheme assures a minimum off-take of 55 percent of contracted capacity. The tariff will be fixed for three years without any escalation.

Many power projects were stranded in the past due to low availability of coal supply, lack of long-term PPAs, regulatory hurdles, and delays in receivables from distribution companies. More than 15,600 MW of operational coal-based power plants have been classified as stressed assets due to the lack of PPAs, ratings agency ICRA said in a recent report. Only 7,600 MW of bids for long-term power procurement have been invited by discoms in Andhra Pradesh, Kerala, Telangana and Uttar Pradesh over the past four years. Of this, PPAs have been signed only for 1400 MW by Kerala and Telangana, the report added.

PFC Consulting will invite bids in the first week of May under the scheme. States like Gujarat, Maharashtra, Rajasthan and Jharkhand have shown interest, a PFC Consulting executive said on the condition of anonymity. While Gujarat and Maharashtra have shown interest in procuring more than 500 MW of power, Rajasthan and Jharkhand are looking to procure less than 500 MW capacity.

Successful bidders will be selected through a transparent tariff-based e-bidding process on Deep e-bidding portal, a government portal for procurement of short term power.

“The scheme is structured well to address not only the concerns of stressed assets but also assist all stakeholders across the value chain,” Sambitosh Mohapatra, partner - energy and utilities at PwC India, told BloombergQuint. “It enhances confidence of investors looking for resolution or opportunities, make utilities respond to the need of providing reliable and affordable power to its citizens post DDUGJY and Saubhagya; and provides an option to phase out inefficient plants.”