YSR seeks cut in interest on IPPs' loans

Andhra Pradesh chief minister Y S Rajasekhara Reddy has urged the Centre to prevail upon the consortia of lenders, led by IDBI, who funded the 216-mw GVK Power and 208-mw Spectrum power project, either to reduce the interest rate on the outstanding loan payable by the promoters or permit repayment of loans without any prepayment premium.

The consortia continues to charge interest ranging between 17.5 per cent and 20 per cent on the loans taken by the promoters of the power projects even after the fall in interest rates long back. The state has sought the Government of India's help in this regard as the past requests by the state power utility met with cold response from the lenders.

The state government is pursuing the issue in the hope of reducing power purchase costs being paid to independent power producers (IPPs).

After its efforts to renegotiate power purchase agreements (PPAs) with IPPs ended in a deadlock, the Andhra Pradesh government is focusing more on indirect ways "� persuading lenders to reduce interest rates on the loans advanced to IPPs.

During his two-day visit to New Delhi, Reddy will meet prime minister Manmohan Singh and Union finance minister P Chidambaram, among others, and discuss some of the issues aimed at reducing the cost of gas-based power projects.

These include a request for reduction in fixed monthly transmission charges for supply of gas to IPPs and administrative price mechanism (APM) for gas for power sector.

The state government has urged the ministry of petroleum and natural gas to instruct Gail to supply gas from Ravva satellite fields at APM only.

Though, the existing four IPPs are entitled to gas at APM as per the gas linkage agreements entered with them for supply of 3.90 MMSCMD, the state has been able to supply only 3.53 MMSCMD. Of this, the supplies from Ravva, which have been excluded from APM, currently stands at 0.57 MMSCMD.

In a separate letter to Manmohan Singh a couple of days ago, the chief minister reiterated his demand for setting up of a regulator to determine gas prices instead of leaving it to market forces.