Power firms oppose Andhra govt’s lower tariff demand

Power firms oppose Andhra govt’s lower tariff demand

Hyderabad: Independent power producers (IPPs) are opposing the Andhra Pradesh government’s demand to sell half their expanded capacities at a reduced rate to the state-run utility Transmission Corp. of Andhra Pradesh Ltd (AP Transco).

The 2006 National Tariff Policy of the Union power ministry enables AP Transco to buy half the additional capacities of IPPs at the lower tarff mentioned in their power-purchase agreements (PPAs), which were signed more than a decade ago, says the state government.

“In terms of the National Tariff Policy, we can procure power from IPPs without going through the competitive bidding from expansion projects of existing IPPs, limited to 50% capacity of their existing capacities," said Ajay Jain, chairman and managing director of AP Transco.

Jain added, the final tariff of the power thus procured from IPPs will be decided by the Andhra Pradesh Electricity Regulatory Commission.

IPPs in the state include GMR Infrastructure Ltd, Lanco Infratech Ltd, Konaseema Gas Power Ltd of the VBC group, Spectrum Power Generation Ltd, Reliance Power Ltd and two subsidiaries of GVK Power and Infrastructure Ltd.

Their combined power generation capacity in Andhra Pradesh currently stands at 2,500MW. They are adding up to 6,500MW.

Though all of them were awaiting the next round of fuel allocation by the Centre to begin expansion work, four have already called for tenders for expansion projects.

They all say they are not obliged to sell their expanded capacities to government utilities at lower rates.

“It doesn’t make economic sense to sell the entire additional power to the state-owned power utilities at the low tariff based on PPAs, when we can actually sell the power in the open market at more than double the PPA tariff," said a senior official of Lanco Infratech, who did not want to be named.

While the average tariff fixed through PPAs stood at Rs2.80 a unit, IPPs are selling the uncommitted power portion in the open market at a minimum price of Rs4.25 and at an average high of Rs8 a unit.

Spot prices of power in March touched a high of Rs7.9 per unit, indicating strong demand, according to a 29 March report of brokerage India Infoline Ltd.

“Continued high demand for power should result into firm merchant rates going forward. We believe merchant rates for the next one year should average at some Rs5.5-6 a unit," the report said.