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Anupama Airy
New Delhi, Nov 23: Leading Independent Power Producers (IPPs) are up in arms against the centre's recent decision of providing duty concessions to mega power projects.
Demanding a level-playing field with mega power projects, these IPPs have conveyed to the power ministry that benefits such as duty-free imports cannot be selectively given to certain power projects. This, the power producers feel, will leave others at serious disadvantage in the future.
According to IPPs, the duty benefits will substantially bring down the cost of power from mega projects thereby putting others at an disadvantage.
Moreover, the sole buyers of power, the state electricity boards (SEBs), will then have a choice to buy power on cost basis, in which case the IPPs, other than mega power producers, may have to incur huge losses.
"Although while signing the power-purchase agreements (PPAs) with SEBs, the IPPs have been assured of being covered for various unseen risks such as fuel cost, calling it a pass-through to consumers.However, given a choice between cheap and costly power, a SEB is bound to opt for cheap power. This shift may even result in reopening of many PPAs, thereby rendering many projects unviable," said an IPP.
According to union power minister PR Kumaramangalam, "We have always discouraged the use of naphtha as a fuel and have also asked IPPs to shift to other cheaper liquid fuels. Naphtha will no doubt result in costly power and the IPPs may then have to bear the repercussions."
Citing the example of Pakistan, the minister said that an uncompetitive tariff structure led to the opening up of many deals for renegotiation even after the IPPs have been operating their plants for a couple of years.
A well-known IPP said that the matter is of serious concern, as the government for the past five years has been inviting IPPs to put up plants, right from 50mw liquid fuel, at Rs 3 plus per unit of first-year tariff, to 500mw coal-based projects at Rs 2.70 first-year tariff.
"Although, if a SEB commits to buy powerat these prices as well as electricity from mega power projects, there is no cause of complaint by IPPs who have spent crores of money in developing power projects in the past few years. Unfortunately, even though implied by the government policies, this cannot be a reality as a SEB will prefer to buy cheap power", the IPP added.
During actual operation, those IPPs with highest tariffs will not be despatched anywhere near the extent, say 85 per cent plant load factor (PLF), that they would need to justify the investment risk. In other words, a smaller non-mega IPP will probably be only dispatched between 50 per cent to 70 per cent PLF.
"This kind of situations are bound to arise and the government must take note of such anomalies well on time in order to avoid conflicts in future", the IPP said.
It is being largely felt that these incentives will have a serious impact on ongoing power projects as well as upcoming projects. This differentiation may even result in killing of many projects as financialinstitutions have begun to re-orient their approach towards a tariff-based project.
Promoters of these power projects have also approached industry associations like the Confederation of Indian industry, Ficci and the Independent Power Producers Association of India to take up this issue with the government.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
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