PPAs force MP to buy power at high prices

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PPAs force MP to buy power at high prices

Long-term power purchase agreements (PPAs) between private independent power producers (IPPs) and state government coupled with a low demand has put Madhya Pradesh in a piquant situation. Despite 75% of state-owned thermal power generation units being shut down Madhya Pradesh, is still forced to purchase and sell power to other states leading to heavy losses.

Presently, only 20% of state’s power requirements are being fulfilled by state-owned thermal plants. Of the average requirement of about 4,000 MW state-owned thermal plants are producing only 850 MW.

The PPAs makes it mandatory on the state to purchase power irrespective of demand, said sources. Thus government has no option but to sell the surplus power to states and entities needing it. However, since onset of monsoon has been good and other sources including hydro-electric generation picking up demand is less and hence sale price of per unit is lower compared to purchase price.

“PPAs should be reviewed and common public should not be burdened with the mistakes of exaggerated projection of demand. Why is the taxpayer burdened,” general secretary of the Vidyut Mandal Abhiyanta Sangha, Er VKS Parihar told TOI.

He added, that his association has been raising the issue for quite sometime but senior officials claim cite legal complications while reviewing PPAs.

As per documents available with TOI, on June 25, only 1.29 crore units of power was purchased from private producers barring Sasan, average cost of this power comes to around Rs 3.30 per unit (as per calculations by power engineers association) and the total power sold was 51 lakh units. These 51 lakh units were sold at lower rates as, there is low demand everywhere. If we were not bound to purchase 1.29cr units, there was no question of availability of these 51 lakh units, thus, revenue loss could have been avoided, said sources.

Experts said the problem has been compounded due to faulty projection about demand and advocate prudent power management to stop revenue losses.

“Sales of power must be made more judicious and it is certain present projected demands are highly exaggerated,” former chairman of Madhya Pradesh Electricity Board, PL Nene told TOI.

“Benefit of the surplus power should be taken and it could be done by proper sales management,” he said.

Interestingly there has been decline in power demands in the state compared to last year so far. As per available information, 401 crore units of power was supplied in between April 1, 2014 and June 25, 2014 but compared to that only 382 crore units were supplied this year during the same period.

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