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NTPC races against time to ink PPA deals

he country’s largest power producer NTPC is racing against time to complete signing of power purchase agreements (PPAs) for the entire 43,000 mw envisaged capacity addition before the implementation of a mandatory tariff-based competitive bidding regime on January 6, much to the dismay of private developers who were hoping to benefit at the cost of the central utility under the forthcoming regulatory dispensation.

From next month, state-owned companies such as NTPC will have to bid on tariff (in competition with other private and public sector companies) to bag any power project. Tariff bidding regime is already in place for private players. NTPC is exempted till January 5 from participating in tariff bidding for the allocation of power projects.

Till now, these companies were getting projects from state governments willing to sign PPAs under tariff determined under a cost plus regime.

According to a study undertaken by the Central Electricity Regulatory Commission (CERC), cost-plus tariffs worked out higher than for a project allocated through competitive bidding.

NTPC would be entitled to the benefits of the cost-plus regime in determination of electricity tariff if it signs PPAs before the introduction of a mandatory tariff bidding regime. This would give the company extra time to prepare it to fight competition from private sector players. NTPC has participated in tariff based bidding in government's ultra mega power projects (UMPP) without any success so far.
NTPC has about 33,000 mw power generation capacity, which it plans to raise to 75,000 mw by March 2017. Of the envisaged capacity addition, NTPC has already completed the signing of PPAs for 39,000 mw and expects to ink similar contracts for the balance capacity.

The company has signed PPAs for 23,500 mw capacity in 2010 itself, as per company sources.

“This is against the spirit of competitive tariff bidding regime which the power ministry is going to introduce,” said a senior executive of a private company.
NTPC had approached the power ministry for extension of the January 6 deadline for the implementation of a mandatory tariff bidding for the allocation of power projects as envisaged in the Electricity Act, 2003. However, the ministry has rejected NTPC’s plea.

The ministry has decided to follow the recommendation of the CERC in line with the provisions of the act. The initial schedule envisaged in the act for implementing a mandatory bidding regime for the procurement of power by distribution companies was January 6, 2006.

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