PPAs can be re-revised: Minister

The government's power purchase agreements (PPAs) with the independent power producers (IPPs) in the state are still open for another round of downward revision.

Minister for energy and petrochemicals Saurabh Dalal on Friday said the revised PPAs with the five private power producers have a clause that the rate of purchasing power can be further reduced through negotiations.

Despite disgruntlement among IPPs, especially the two private sector IPPs operating in the state, the state government had in December last revised the PPAs with IPPs, thus giving a benefit of Rs 495 crore to the cash-strapped Gujarat Electricity Board (GEB).

Although the PPAs were signed for a period of 20 years, the government revised them in less than 10 years. IPPs have so far invested over Rs 6,000 crore in the state.

Speaking on reforms that the state government initiated in the power sector, Dalal said, "The GEB has saved Rs 495 crore through revising the PPAs with IPPs. The revised agreements have a clause that the rate at which we buy power from these companies can be further reduced."

The five IPPs operating in the state include three state government-run companies "" Gujarat Industrial Power Corporation Ltd (GIPCL), Gujarat State Electricity Company (GSEC) and Gujarat State Electricity Generation (GSEG) "" and two private electricity producers "" Gujarat Paguthan Electricity Company Ltd (GPECL) and Essar Power.

According to the PPA, the independent power companies operating in the state can sell power only to the GEB and no one else within or outside Gujarat.

The state government in 1994 had entered into PPAs with the five IPPs for a period of 20 years and these companies were supplying electricity to GEB at higher rates but by renegotiating with the IPPs, the firms have agreed to supply electricity to GEB at cheaper rates, Dalal had said in December last.

With the new PPAs in place, the GEB will save Rs 240 crore through power purchase from GPECL, Rs 62 crore from Essar, Rs 94.044 crore from GSEC, Rs 73.075 crore from GIPCL and Rs 25.21 crore from GSEG.

According to the December pact, GPECL has agreed to decrease the rate from Rs 1.73 per unit to Rs 1.20 per unit and Essar Power has reduced the rate from Rs 1.62 per unit to Rs 1.30 per unit.

According to statistics, the profit margin of IPPs do not exceed 20 per cent and sources said these companies are finding it difficult to operate as the state government has unilaterally been deducting around 30 crore from the total payment of IPPs for the past one year.

While Essar Power has set up a 300 MW unit, GPECL has set up a 615 MW unit. GIPCL has two generation plants of 155 MW and 240 MW, while Gujarat State Energy Generation Ltd has a 156 MW plant.

"The power reforms aim to generate surplus electricity. I am confident that electricity rates will fall in the days to come," Dalal said.