Review And Restructure

Amid the controversies related to the state governments cancelling power purchase agreements, or PPAs, especially of the renewable energy players, a group led by Special Secretary Sanjiv Nandan Sahai with representatives from the Central Electricity Authority, Central Electricity Regulatory Commission and Power System Operation Corporation Limited, has been formed. The group has been asked to review the entire system, and suggest restructuring of the agreement.

The state governments are finding it difficult to cope with dipping prices in renewable energy and locking PPA for two decades. Andhra Pradesh has cancelled recently signed PPAs of various renewable energy projects. Before this, some states such as Uttar Pradesh, Karnataka and Gujarat refused to adhere to the agreements. The investors, too, find it difficult to convince banks to raise debt for this period, but they insist on longer tenure PPAs to spread the fixed cost and get competitive tariff. It will be difficult for the group to find a win-win deal.