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The present power scenario in Punjab
Punjab, a power surplus state now, has neither been able to reduce tariffs nor increase the power demand, as committed by last government due to its lopsided policy. Under present circumstances, the tariff reduction possibility seems remote.

For the tariff reduction, the Punjab government needs to revisit power purchase agreements with private generators made under a faulty power generation policy. Punjab State Power Corporation Limited (PSPCL) has signed power purchase agreements with private generators for using 100 per cent power available with them. In case of non utilisation, PSPCL has to pay fixed charges. The private sector thermal plants cause a burden of over Rs 2750 crore even without supplying any power as fixed charges.

Punjab should now revise the power purchase agreement by putting a cap on power purchase at 70 per cent instead of 100 per cent and backing down of state and private thermal units on equal footing so that state thermal plants should not remain idle for most part of the year. The Punjab power generation policy should be amended suitably to safeguard the states interest.

With the coming up of three thermal plants in the private sector, the adverse implications of the surplus power have already come to the fore as the plant load factor (PLF) of state sector thermal power plants has dipped to abnormally low levels. The plant load factor of Lehra Mohabatt and Ropar thermal plants for the financial year has come down to 36.50 per cent and 27.28 per cent respectively.

During last financial year, state sector plants remained on forced shut down except for paddy season to pave way for private sector generation. This year also, all the three thermal plants of PSPCL with a total capacity of 2640 MW will remain under shut down during the lean period and token running of one unit each at reduced load has become a formality.

At present, two thermal plants at Rajpura, Talwandi Sabo in private sector with capacity of 3380 MW are running and state sector plants have been put on hold. The position is going to worsen when 540 MW Goindwal Sahib thermal plant starts generation when the company is able to arrange coal.

The radical and irreversible changes were made in Punjab when power generation policy was introduced in June 2010 which opened the floodgates to private power companies with guaranteed power take off and other incentives. It may be mentioned that the setting up of thermal plants was allowed under MoU route and not competitive bidding.

In the normal course, it is for the private power developer to assess the demand for electricity before setting up a power plant and take on the risk of finding a market for its power. The PPA format with a deemed generation clause was meant largely for the public sector companies as both the generating companies and the distributing utilities were in the public sector.

All of these power plants have signed power purchase agreements (PPAs) with the PSPCL imposing the so-called "deemed generation" clause that requires PSPCL to compensate them for their fixed charges, irrespective of whether they supply power or not. Under such circumstances special audit of private sector thermal plants is a must to safeguard the public interest.

Punjab was too eager to gain the political profits when it approved setting up of thermal plants with the help of private developers. Now this has boomeranged as the anticipated power demand has not come in absence of lack of industrial growth. The supply of cheap power for domestic consumers remains a dream. Today, the average cost of power has risen from Rs 3.30 per unit in 2006-07 to Rs 7.00 per unit.

Another reason for the Punjab power sector being in a mess is that electricity is being used as a tool for garnering votes. Promises of cheap power or increasing hours of free power have been made without bothering about the financial health of PSPCL. The number of categories getting free or subsidised power are increasing every time before and after the election period and there is no review of the list. Barring the agricultural sector, no other consumer group should be provided free power.

The tariff relief being sought by the industry this year may not be sufficient to increase the power consumption drastically in the state. It may happen after few years when industrial growth in the state picks up at least equivalent to the national level. There is a need to change the existing slabs for domestic consumers and reduce the number of slabs.

The planned huge capacity addition in the renewable energy sector could further spell doom for PSPCL and this policy also needs a relook.

Editorial NOTE: This article is categorized under Opinion Section. The views expressed in this article are solely those of the author and do not necessarily represent the views of In case you have a opposing view, please click here to share the same in the comments section.
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