Ministry of energy puts conditions to surround fence package for stressed units

NEW DELHI: The power ministry has put conditions to verify the possible misuse of the rescue package for stressed coal power plants, as well as to guarantee a clean play by the generation and distribution companies On the subject of making payments on time.

In March, the government approved a series of measures, recommended by a high-level committee, to eliminate the stress of power plants with a total capacity of 40,000 MW. According to the package, the coal links of the power plants that cancel the PPAs (energy purchase agreements) due to noncompliance with payment for discoms had to be valid for two years. This was done to give generation companies adequate time to look for alternative PPAs.

At a meeting held by Secretary of Energy SC Garg last week, it was decided that power plants that cancel PPA for noncompliance with payment for discoms will not be able to sell electricity bilaterally, but only through the government's DEEP portal or energy exchanges at the price determined by the market for a maximum of two years.

It was also decided that even in case of noncompliance with payment for discoms, the generation units may cancel the PPAs only in accordance with the provisions of the agreement. This underscores the government's great respect for the sanctity of contracts, said an industy player.

The conditions in the existing LoA (letter of assurance) or FSA ( fuel supply agreement ) will also continue for a maximum of two years. If necessary, the necessary modifications will be made to the existing LOA/FSA, the meeting decided.

After the two year period, the carbon bond will be canceled if the generator cannot secure a long or medium term PPA within that period. In the case of long-term PPA, such provision shall not apply during the two terminal years of the PPA.

According to the package announced in March, power plants that are ready but have no coal bond (guarantee of supply) from Coal India Ltd because they do not have PPA should receive a link on the basis of short-term PPA for up to one year .

To create a market for stressed power plants, the acquisition of bulk energy by a nodal agency against pre-declared links was approved with the willingness to allow the central/state gencos to act as aggregators. The amount of coal for special electronic auctions for electricity auctions and bonding at regular intervals was also approved.

The mandatory payment of the surcharge for late payments by discoms and several other technical measures were also approved to eliminate the stress of the power plants, including those promoted by Adani, GVK, GMR, Jaypee and Essar groups

These measures were suggested by a high-level committee established to revive the stressed assets in the electricity sector and approved by a GoM (group of ministers).

The Cabinet, however, postponed a decision on the suggestion of the high-level panel to secure payments through discoms to private energy producers and stressed gas-based assets. The panel had suggested that financial institutions discard bill bills to generators.