Punjab CM gives nod to terminate PPA with GVK Goindwal Sahib Power Ltd
Reiterating his Government’s firm commitment to providequality and uninterrupted power supply at affordable cost to the consumers, theChief Minister Charanjit Singh Channi on Saturday approved the PSPCL’s proposalto terminate GVK Goindwal Sahib (2x270 MW) Power Purchase Agreement.Subsequently, the Punjab State Power Corporation Limited (PSPCL) has issuedtermination notice to the company.
Notably, a preliminary default notice has been served byPSPCL to GVK today for cancellation of PPA due to high power cost and fallinglowest in the merit order, procurement of energy from GVK that had beenrestricted only within the range of 25% to 30% during most of the times of ayear resulting in higher tariff of about Rs.7.52 per unit for last year.
Pointing out further, CM Channi said that this step hadbeen been taken to safeguard the interest of consumers of the State by way ofreducing the burden of costly power.
Divulging details, a Spokesperson of the Chief Minister’sOffice said that the basic premise of entering into PPA by GVK with PSPCL wasto provide cheaper power to PSPCL. GVK had been generating energy by arrangingcoal from Coal India Limited under SHAKTI Policy. As per PPA, GVK was requiredto arrange a captive coal mine but it failed to do so, even after lapse of morethan 5 years of synchronization with the grid, he added.
In addition to this, the Spokesman said the capacitycharges are being decided by Punjab State Electricity Regulatory Commission(PSERC) based on capital cost of around Rs.3058 Crore, which is equivalent toabout Rs.1.61 per unit of fixed cost. Going against this decision, theSpokesperson mentioned that GVK had moved to Appellate Tribunal for Electricity (APTEL) for claiming higher fixedcost to the tune of Rs.2.50 per unit based on claims of capital cost of aboutRs.4400 Crore which is pending adjudication.
As per claims made by GVK, the Spokesperson pointed outthat variable cost is around Rs.4.50 per unit and fixed cost is around Rs.2.50per unit. Thus, the total claim of GVK under tariff comes out around Rs.7.00per unit which increase further due to surrender of its costly power.Therefore, the intention of GVK is clear that it requires to charge highertariff which is not the basic premise on which PPA was entered into with PSPCL.This has created a commercially un-viable for PSPCL to continue PPA with GVK.
Moreover, the GVK had defaulted for not clearing duesaccrued to it timely, against the loans taken by it from various lenders.Consequently, it had become a Stressed Asset and a resolution plan was requiredto be implemented by GVK which it failed to do so. Accordingly, lenders haveapproached National Company Law Tribunals (NCLT) for resolution plan for GVKwhich is under consideration before the Tribunal, the Spokesperson revealed.