Punjab Chief Minister Charanjit Singh Channi on Saturday approved a proposal of power utility Punjab State Power Corporation Limited (PSPCL) for terminating the power purchase agreement with private sector electricity generator GVK due to high cost.

High power cost

The PSPCL has issued a termination notice to the company, according to an official statement.

The development assumes significance as several State Congress leaders, including Navjot Singh Sidhu, have been pressing for scrapping the ‘faulty’ PPAs signed during the previous SAD-BJP regime.

“A default notice has been served by the PSPCL to GVK on Saturday for cancellation of the PPA due to high cost and falling lowest in the merit order, procurement of energy from GVK that had been restricted only within the range of 25% to 30% during most of the times of a year resulting in higher tariff of about ?7.52 per unit for the last year,” the statement said.

Mr. Channi said this step has been taken to safeguard the interests of the consumers by way of “reducing the burden of costly power”.

A spokesperson of the CMO said the basic premise of entering into the PPA with GVK was to provide cheaper power. The GVK power project was set up at Goindwal Sahib with a capacity of 2x270 MW. GVK has been generating energy by arranging coal from Coal India limited. As per the PPA, the company was required to arrange a captive coal mine but it failed to do so, he added.

The spokesperson said the capacity charges are being decided by the Punjab State Electricity Regulatory Commission (PSERC) based on capital cost of around ?3,058 crore, which is equivalent to about ?1.61 per unit of fixed cost. He said GVK went against this decision and moved the Appellate Tribunal for Electricity for claiming higher fixed cost of ?2.50 per unit, which is pending adjudication. As per the claims made by GVK, variable cost is ?4.50 per unit and fixed cost of ?2.50 per unit, he said.

“Thus, the total claim of GVK under tariff comes out around ?7 per unit which increases further due to the surrender of its costly power. Therefore, the intention of GVK is clear that it requires to charge higher tariff which is not the basic premise on which PPA was entered into with PSPCL,” the spokesperson said.