Explained: What are the power deals troubling Punjab?

Kanchan Vasdev
punjab power deals, Power Purchase Agreements, Punjab PPAs, Electricity tarrif hike, punjab power tarrif hike, indian express explained, indian express news

Punjab tops the lists of states in terms of power tariff. After the recent hike, domestic consumers pay Rs 8.37 per unit.

Ever since Punjab’s power regulator cleared a tariff hike by 36 paise per unit from January 1, the spotlight has returned to three Power Purchase Agreements (PPAs) between the government and private plants. The SAD-BJP, during whose regime the PPAs had been signed, and AAP are targeting the Congress government, but for different reasons.

What are these PPAs?

These were signed with Rajpura Thermal Power Plant, Talwandi Sabo Power Project, and Goindwal Sahib Power Plant. Under the agreements, fixed charges are to be paid to these three plants even if the state does not require power. When the SAD-BJP government had signed these, it had come under attack from the then opposition Congress, which had promised that it would renegotiate the PPAs if voted to power.

Following the tariff hike, AAP has demanded scrapping of the PPAs because of the burden of payment it places on the state even when power is not purchased. The SAD-BJP, on the other hand, has been targeting the government for losing court cases over payment issues relating to the power sector. SAD chief Sukhbir Badal has accused the government of a “fixed match” for losing the cases. Congress leaders, for their part, have been accusing SAD of a “fixed match” in signing agreements to “benefit the private companies”.

What happened in court?

There were two cases. In August 2019, the Supreme Court directed the state to pay coal washing charges to the tune of Rs 2,800 crore to Rajpura Thermal Power Plant and Talwandi Sabo Power Plant. Before the case reached the Supreme Court, the Punjab State Electricity Regulatory Commission as well as the Appellate Tribunal For Electricity had ruled in favour of the state government. Now, the state has come under attack for not “defending” the case well enough.

The other case was in the High Court. EMTA Coal Ltd has been seeking compensation for non-payment of dues by the Punjab government through the Arbitration Tribunal. The court ruled against the government. The dues amount to Rs 1,600 crore, a burden that would be passed on to consumers eventually.

How expensive is powe r in Punjab, and what do the PPAs cost the exchequer?

PPAs were signed with Rajpura Thermal Power Plant, Talwandi Sabo Power Project, and Goindwal Sahib Power Plant. Under the agreements, fixed charges are to be paid to these three plants even if the state does not require power.

The government pays Rs 8 per unit to the power plants, while Delhi purchases power at Rs 3 per unit and Haryana at Rs 2.50 per unit. At a recent Cabinet meeting, ministers said that on account of the PPAs, the state would end up paying Rs 65,000 crore to these private plants as fixed charges.

Former Power Minister Rana Gurjit Singh has stated that there was always a way to renegotiate the PPAs. “We need to study the legal aspects and do it fast. If the Uttar Pradesh government could renegotiate PPAs, and get the price of every unit decreased by 20 paise, why can we not do it?” he has said. “The PPAs bind us to pay fixed charges for 100% production of the power while other states pay fixed charges for 80% power only. We should fight the case well and not just buy time.”

What is the government doing now?

Though there is no official statement on renegotiate the PPAs or not, Chief Minister Amarinder Singh recently announced that the government would bring a white paper on the issue so that the people would know who was responsible for the plight of people. Government functionaries who did not wish to be named, however, said it was questionable where these could be renegotiated as they are binding on the government now. The CM has said that it was up to the Supreme Court to take a call on this.

Not just the Opposition but some ministers, too, have objected to the hike and sought an inquiry into all these issues and review of PPAs. The ministers raised these issues in a Cabinet meeting. Punjab Congress Chief Sunil Kumar Jakhar has opposed the hike publicly and demanded that the issue be taken to a logical conclusion.