Confusion over power purchase deal  

Published: January 20, 2019 22:13:33 | Updated: January 22, 2019 22:07:52


The power subscribers are a bit confused over the disclosure made by the state minister for power, energy and mineral resources that the government has no plan to renew the existing contracts of the privately-owned oil-fired power plants. They do have at least a couple of genuine reasons for being sceptical about the government's stance. The first reason is the government's past track record in the matters of granting permission to the oil-fired rental small- and medium-scale power plants and the second one relates to the non-availability of large and low-cost replacement for the rental power plants.

The government allowed operation of both gas- and oil-fired small and medium power plants as a stop-gap arrangement under a law, titled, the Speedy Supply of Power and Energy (special provision) Act 2010. The law, made effective initially for two years, contains a couple of provisions that, many allege, promotes non-transparency in bidding process and other financial matters. It empowers the government to award power and energy sector contracts on the basis of unsolicited offers and grants the officials involved in such contract-awarding activities immunity from prosecution. Moreover, the tenure of the law was extended four times since its enactment. The contracts with power plants also got multiple extensions.

One might find the opposition to the renewal of contracts with oil-fired rental power plants quite intriguing, for these plants have saved the power subscribers from a perennial problem of severe load-shedding. The power generation capacity has recorded nearly fourfold increase during the past eight years, helping the economy maintain a decent growth rate. There is no denying that the power subscribers, under no circumstances, are ready to go through the nightmarish experience of unending power outages again. They also do not endorse the government's continued dependence on expensive private rental plants for power generation. It is exacting a substantial cost from them, directly and indirectly. Their monthly power bills, on the one hand, have increased manifold during the past decade and a part of the money they pay to the government as tax annually is being spent on subsidising the power purchased from these private plants, on the other. What turned out to be more distressing for the power subscribers are the irregularities in disbursement of funds to the private rental plants as 'capacity payments'. The government is required to make such payments if the plants remain idle for the government's failure to buy power from those. This particular provision in the contracts signed between the Power Development Board and the private power plants has given rise to a strong suspicion about financial irregularities.

It is, however, not clear from the minister's statement as to how the government would meet the demand for power following the non-renewal of existing contracts with the private power plants. Will it sign contracts with new private power producers by extending the special law yet again? Such a question arises since the government is not left with many options. The problem is that the relevant authorities have failed to make available reliable and low-cost power generation alternatives despite having enough time to do that. It has initiated a number of coal-fired large power plants, but they are unlikely to start their operation on schedule. And the nuclear power plant, too, would take some more years to start power production.

The government, no doubt, is trying other options to ensure supply of sufficient power to the people at an affordable price. Power import from neighbouring India and construction of joint venture hydro-power plants in Nepal and Bhutan are among such options. The government might also explore the option of using liquefied natural gas (LNG) for power generation. It would, surely, be a better alternative to power purchase from rental plants at exorbitant prices.  

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