Independent Power Projects (IPPs) have asked Central Electricity Regulatory Commission (CERC) to ensure that states do not re-open contracts for setting up power projects.
In a unique exercise where the CERC initiated a structured interaction with 12 major Independent Power Companies today, the latter also cited problems in finalising fuel supply agreements and delay in clearance as the other major vexing issues faced by them.
The private players brought up the need for more transparency and uniformity in risk assessment made by financial institutions and banks lending to power projects and addressing problems in loan tenure mismatches.
Tackling the issue of untimely payments by State Electricity Boards (SEBs) and need for benchmarking of efficiency norms were also sought by the private players.
Tata Power, Essar Power, Rosa Power, Reliance Power, Lanco Kondapally Power Company and GPEC were among the companies which participated in the deliberations with CERC chairman A K Basu and members of the Commission.
In the meeting, IPPs raised severe objection to states governments/SEBs resorting to reopening of Power Purchase Agreements (PPAs) after contracts having been signed. With respect to inadequacies in the fuel supply agreements, most IPPs have said the allocation of gas/coal is carried out in a ad hoc fashion, resulting in projects being held up for a long time.
IPPs also requested the CERC to broaden the time frame set for competitive bidding, presently set at 12 months in the guidelines. In order to tackle the problem of SEBs not paying up on time, IPPs have asked the for discretion to approach the CERC or the concerned state regulator if outstanding are delayed by more than six months.
The problem of mismatch in tenure of loans given by FIs and banks was also raised by the IPPs. As per the new CERC norms, the straight line method of depreciation being followed and depreciation and advance against depreciation is assumed for a 12 year period, while most banks and FIs insist on repayments in a seven year period, resulting in cash flow problems for the private players.
Following the deliberations, CERC chairman A K Basu said the IPPs have welcomed the initiative taken by the Commission for taking note of their grievances. "What has emerged is that uncertainties are more with regard to non-regulatory issues like lack of sanctity of contracts and delay in clearances," he told Business Standard. We have taken note of their grievances and would take them up at the right forum, Basu said.
"The existing CERC norms would be effective till March 31, 2004. The inputs from such interactions would be used while framing the new norms," Basu said.
CERC is slated to continue its interaction with major players in the sector. The central regulator would meet major equipment suppliers on December 23 and would be meeting FIs and banks lending to power projects after that.
While financial health of SEBs has been the single biggest problems hindering the growth of IPPs, the result of inaction have been glaring.
Of 40 independent power projects (IPPs) which were expected to come up in the country, the ministry of power has narrowed down its focus on nine projects with generation capacity of 4,287 MW which have "reasonable chances" of achieving financial closure over the next one year.
A total of 31 projects with a cumulative capacity of 18,715 MW are stuck with no likelihood of achieving financial closure in the near future, power ministry officials said.
