Power Struggle: Discom PPAs go for a toss, now Punjab set to cancel a few

In a statement released on Wednesday evening, the chief minister’s office said that the discom had been directed to revoke the PPA with Vedanta’s subsidiary Talwandi Sabo Power (TSPL), which runs the 1,980 mega-watt (MW) station in the state.

Punjab chief minister Captain Amarinder Singh has asked the state’s electricity distribution company (discom) – Punjab State Power Corporation (PSPCL) – to reexamine all power purchase agreements (PPAs) signed by the former SAD-BJP government with various private power plants, and revise or cancel the contracts that are ‘one-sided” and ‘not beneficial to the state’. In a statement released on Wednesday evening, the chief minister’s office said that the discom had been directed to revoke the PPA with Vedanta’s subsidiary Talwandi Sabo Power (TSPL), which runs the 1,980 mega-watt (MW) station in the state.

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The Talwandi Sabo plant is the largest single source of power in Punjab, and after all the units of the station broke down earlier in the month, the state government had to impose restrictions of the industrial consumers, permitting them to draw only 50% of power capacity allocated to them for a few days. Stating that the plant “miserably failed to perform in the current paddy season”, the government notice said that the PPAs with private power stations “were established basically to meet the power demands of the State especially during paddy sowing and summer season”.

The Punjab government spent Rs 886 crore in June-July to import power after Talwandi unit broke down. Of the total installed power generation capacity of 14,362 MW in the state, 6,902 MW are run by private firms. Major private plants in the state include L&T’s 1,400 MW Nabha and GVK’s 540 MW Goindwal Sahib projects.

If the PPAs are repealed, Punjab will be toeing the line of Andhra Pradesh, Gujarat and Uttar Pradesh, which have taken steps undermining the sanctity of these contracts. Soon after assuming office in May 2019, Andhra Pradesh chief minister YS Jaganmohan Reddy had revised the PPAs, signed by the previous government, with solar and wind projects of around 8,000 MW in the state. The matter is now before the Amaravati High Court. Though its action did not amount to PPA cancellation, Gujarat too, in February this year, had suspended the process for signing PPAs for 700 MW solar capacity with the winners in the auctions held earlier. In June, Uttar Pradesh also refused to sign PPAs for 150 MW of solar power with the winners of the reverse auction held in February 2020.

“Sanctity of contracts following the due process of law has been stressed time and again by the Union power ministry and upheld by courts,” Ashok Khurana, director-general, Association of Power Producers, told FE. He added that “the PPAs with private power plants in Punjab were signed after due competitive bidding process and the tariffs were adopted by the regulatory authorities as prescribed under the Electricity Act”. Of total 14,362 MW installed power plants in Punjab, 6,902 MW are run by private firms which include L&T’s 1,400 MW Nabha and GVK’s 540 MW Goindwal Sahib projects.

“PSPCL has already issued notice to TSPL by imposing the penalty but as the PPAs are one-sided, the penalty imposed will be very meager in comparison to the losses caused by the failure of these thermal plants,” the state government said. Restrictions on coal import imposed by the Centre had been cited by Vedanta as one of the major reasons for the frequent breakdown at the plant. Power crisis in the state turned more severe with the increase in demand from the agricultural sector and low water levels in its reservoirs amid prolonged dry spell.