NTPC had desired that MSEB should ensure payments for the power purchase and arrange an adequate security mechanism for ensuring the same.Mantralaya sources told The Financial Express that MSEB will soon sign separate power purchase agreements (PPAs) with the NTPC for the supply of power from Vindhyachal-II (319 mw), Sipat (638 mw), Kawas-II (202 mw) and Gandhar-II (186 mw).

MSEB is desperately in need of power as it will face the peak load shortage ranging from 209 mw to 1,974 mw from the year 2004. According to the proposed PPA, NTPC has agreed to switch over to gas as fuel within two years and if failed to do so MSEB will have the liberty to review the decision and take appropriate decision.As far as government guarantee is concerned, the NTPC will make a demand by a written notice for payment upon the guarantor pursuant to this guarantee if MSEB has failed to pay within seven days of the last date for payment of bills.

In case the guarantor fails to pay the amount within 15 days of receipt of the demand notice from NTPC, the latter will have right to get the payments inclusive of surcharge directly from the centre through central plan assistance to the state or from the state's RBI account in case of default in payment automatically without referring it to the state government or MSEB.

The government guarantee will remain valid at all times during the entire life of the power plant and even any extended life of the plant. It will extend to cover the balance dues at any time from MSEB to the NTPC.In case of power supply from Sipat, disincentive for reduction in generation below 68.49 per cent inclusive of deemed generation will be applicable at the rate of 1.46 per cent of the fixed charges for every one per cent fall in plant load factor. During the stabilisation period of 180 days from the date of commercial operation, the PLF norms for disincentive would be 51.37 per cent.