Plan panel wants power majors to undertake joint projects

The central power companies, which include NTPC, National Hydro Electric Power Corporation and North Eastern Electric Power Corporation, have surplus money to invest because of the preferential payment arrangements they enjoy and also to the post-tax returns of 14 per cent allowed to them.

State regulators, in contrast, do not provide adequate returns to state power sector units, the Planning Commission has said in its mid-term appraisal of the Tenth Five-Year Plan, adding that this did not leave them with adequate investible resources to meet the demands of the distribution sector.

"State units often have to make do with tariffs that effectively yield zero returns in an attempt to keep tariff increases (which consumers have to bear) to a minimum and in order to ensure that payment obligations to the central units under the tripartite agreements are met," said an official in the Planning Commission.

This means that in order to invest in distribution, they have to borrow funds, which worsens their financial situation.

"Unless aggregate technical and commercial (AT&C) losses come down to around 15-20 per cent from the current level of 40 per cent, state utilities can not be expected to pay the central units even for current purchases," the official added.

Central public sector units are expected to account for about 53 per cent of the energy generated in the country by 2012. It is also likely that all inter-state transmission will remain under CPSU control by that time, the mid-term appraisal document said.

NTPC, the state owned power company, which accounts for over 20 per cent of the installed capacity and which generated almost 30 per cent of the power in the country last year, has two joint ventures in generation with Steel Authority of India Ltd and one with Tamil Nadu Electricity Board.

It is in JVs with the railways and with Gujarat Power Corporation Ltd for setting up plants and has signed a memorandum of understanding with Indian Oil Corporation Ltd to set up petro-fuel based power plants.

The company issued 866 million shares via an initial public offer last year. The closing price of the share on Friday was Rs 83.05 per share.