Power shortage: Almost 18,000 MW of capacity is looking for buyers

MUMBAI: While Indians in many parts of the country sit idle due to long power cuts, ironically, power projects that could have lit up around two crore households, are idle too. Power producers say that consumers have to put up with power cuts, which may last from two hours to as long as six hours in some parts of the country, due to this “artificially” created shortage of power.

“Most states are load shedding because the price realised from sale of electricity is less than the cost for procuring it. They make losses due to a lot of issues like non-recovery of receivables, pilferage, etc. Instead of fixing these problems, discoms prefer to go for load shedding and avoid buying power. This has created an artificial lack of demand for power. Many projects are ready for commissioning, but are unable to find discoms to sell power,” said Lajpat Shrivastav, CEO, thermal, Moser Baer Projects.

Almost 18,000 MW of capacity, either completely ready or close to completion, is looking for buyers, but the state-run power distribution companies (discoms) would rather undertake load shedding than buy more power. Loss- making discoms have been shying away from signing pacts with power producers for long-term supply of power because they do not want to bear the additional cost.

“Only three discoms have invited bids to buy power in the past two years. But even they haven’t signed power purchase agreements even though the power the available,” Ashok Khurana, director general of Association of Power Producers, told ET.

“Power producers are ready to generate power, but since they are unable to sign long-term pacts with discoms, they are not allowed to draw coal. Power cuts are hurting consumers and industry. If this is not corrected, a total of Rs 72,000 crore of loan to power sector may turn into non-performing asset,” Khurana said.

A senior executive from a power discom said that the most discoms are in the process of debt restructuring and therefore want to keep costs under check. Price of long-term power on new contracts has increased by 50% in the past two years to around Rs 5 for every unit due to increase in fuel prices. In the past two years, only Rajasthan, Uttar Pradesh and Tamil Nadu have invited bids for buying power. According to the fuel supply agreements ( FSA), Coal India starts supplying the contracted coal to developers only when the power purchase agreements are in place. Therefore, in the absence of these agreements, projects are stranded without fuel.



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2 Responses

  1. Nick says:

    Sounds like a similar problem experienced in the States when they had traders manipulation power prices and load Shedding when Enron collapsed. Albeit that was a free market scenario – Is the power supply in India also privatised, state run or a combination of both?

    • IndianPowerSector.com says:

      Its a combination of both state run and private, however the main problem is demand-supply mismanagement and constrains of transmission capacities

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