Punjab Govt scraps power purchase agreement with GVK Goindwal plant

Tribune News Service

Chandigarh, October 30

Reiterating the government’s commitment to provide quality and uninterrupted power supply at affordable cost, CM Charanjit Singh Channi today approved the PSPCL’s proposal to terminate GVK Goindwal Sahib (2x270 MW) power purchase agreement (PPA).

Also read: Goindwal Sahib PPA: Act against erring officials, say Experts

Subsequently, the Punjab State Power Corporation Limited (PSPCL) has issued termination notice to the company. The PSPCL today served a preliminary default notice to GVK for cancellation of the PPA due to high power cost and falling lowest in the merit order, procurement of energy from GVK that had been restricted only within the range of 25%-30% during most of the times a year, resulting in higher tariff of about Rs 7.52 per unit for last year.

Channi said the step had been taken to safeguard the interest of consumers of the state by way of reducing the burden of costly power.

A spokesperson for the Chief Minister’s Office said the basic premise of entering into a PPA by GVK with PSPCL was to provide cheaper power. GVK had been generating energy by arranging coal from Coal India Limited under SHAKTI policy. “As per the PPA, GVK was required to arrange a captive coal mine, but it failed to do so even after lapse of more than five years of synchronisation with the grid,” he said.

The spokesman said the capacity charges were being decided by the Punjab State Electricity Regulatory Commission based on the capital cost of around Rs 3,058 crore, which was equivalent to about Rs 1.61 per unit of fixed cost.

Going against this decision, the spokesman mentioned that GVK had moved the Appellate Tribunal for Electricity to claim higher fixed cost to the tune of Rs 2.50 per unit based on the claims of capital cost of about Rs 4,400 crore, which is pending adjudication. As per claims made by GVK, the spokesman pointed out that variable cost was around Rs 4.50 per unit and fixed cost was around Rs 2.50 per unit. Thus, the total claim of GVK under tariff came out around Rs 7 per unit, which further increased due to surrender of its costly power.

Therefore, the intention of GVK was clear that it required charging higher tariff, which was not the basic premise on which the PPA was entered into with the PSPCL. This made it commercially un-viable for PSPCL to continue the PPA with GVK.

The GVK also defaulted on loan dues. Consequently, it became a “stressed asset” and a resolution plan was required to be implemented by GVK, which it failed to do so.

25-30% Energy procurement during most part of year

Rs 7.52 Per unit cost last year (Rs4.50/unit variable cost, Rs2.50/unit fixed cost)

Moved tribunal

• GVK was required to arrange a captive coal mine, but it failed to do so even after 5 yrs of synchronisation with the grid
• Against Rs1.61/unit fixed cost as decided by PSERC, GVK moved the Appellate Tribunal for Electricity to claim Rs2.5/unit

Defaulted on loan

• GVK had defaulted for not clearing loan dues timely
• It became a ‘stressed asset’ and further failed to implement a resolution plan