Even after securing techno-economic clearances from the Central Electricity Authority (CEA), the fate of as many as 13 fast track projects in the power sector, with investments of Rs 32,000 crore, is still hanging fire.

Negotiations with the state and central governments on major issues related to counter-guarantees, power purchase agreements (PPAs) and fuel supply agreements are still on. As a result none of these projects have achieved financial closure as yet.

Signing of the PPA comes foremost on the agenda of an independent power producer (IPP) as without this, no loans are sanctioned by any financial institution.

However, the existing tariff structure coupled with other basic issues is coming in the way of signing of these agreements.

It is felt that since PPA, besides being a buyer-seller arrangement is also a financing document based on which the lenders give money, it should identify the various risks involved and outline the risk sharing amongst parties.

"The state electricity boards (SEBs) often do not understand this aspect which leads to a long drawn process of finalising project agreements and in many cases, renegotiations. Standarised power purchase agreements, providing risk sharing by the contracting parties, are thus the need of the hour", said a highly placed industry source.

IPPs are of the view that the heavily subsidised tariff structure of the SEBs has made it difficult for them to reach a breakeven point as far as their financial performance is concerned.

As per the Planning Commission estimates, if the SEBs continue to operate on the same lines, their internal resource generation during the next ten years will be negative - around Rs (-) 77,000 crore.

Rationalisation of tariff and initiation of reforms in SEBs is therefore imperative for attracting sufficient investment.

Also, against the earliar estimates of 57000 mw of required incremental capacity, Planning Commission consideres an addition of only 40,000 mw as feasible.

But with the current status of the private sector projects, it is felt this incremental capacity can materialise only during the later years of the Ninth Plan implying power shortages during the first three years of the Plan.To overcome this, it is felt that the government should promote short-gestation power projects.

The liquid fuel policy of the government in this regard facilitated the process in terms of acceptability of such projects, however, a number of uncertainities still exist as regards the availability, quality and price of liquid fuel.

The recent draft notification on the liquid fuel pricing agreement by the nodal ministry has irked IPPs to a great extent and many of them have questioned the government's rationale in putting the pricing of the liquid fuel outside the purview of the administered price mechanism.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.