In terms of money, the agreements provide for the Punjab State Power Corporation Limited to bear fixed costs of power generation for three years, before it can terminate the contract; legally, the agreements are loaded in the favour of the private companies, say experts

Patiala The Punjab government’s direction to the Punjab State Power Corporation Limited (PSPCL) to revise/cancel Power Purchase Agreements (PPAs) with independent power producers is likely to be an uphill task on the two major counts of legality and financial implications.

In terms of money, the agreements provide for the PSPCL to bear fixed costs of power generation for three years, before it can terminate the contract. This amount, say experts, will be astronomical and run into thousands of crore rupees. Legally, the agreements are so loaded in the favour of the private companies that a challenge to Punjab’s action will definitely be upheld, experts claim.

In Andhra Pradesh, the Supreme Court has rebuked the state government over the scrapping of similar PPAs. A PSPCL official told HT, “In a letter to the Andhra Pradesh chief secretary, the Union power secretary has advised the state to desist from revisiting PPAs in the renewable energy sector, citing the hit on investor confidence and he country’s renewable energy targets. We have to keep this in mind.”

Punjab failed to act on

previous legal opinion

Even as the PPAs, signed during the previous government, have been long flagged as lopsided and faulty, the state government failed to act on two previous legal opinions by its advocate general Atul Nanda.

In his latest opinion tendered in the first week of this month, Nanda had observed, “Before I enter into a legal examination on the queries of law, I must record my concern as to the manner in which these PPAs have been structured and signed. The language of both these PPAs puts the PSPCL in an extremely weak bargaining position, loaded with astronomical fixed charges, with all rights under the agreements tilted in favour of private power producers. The documents reads like a one-sided agreement in favour of the private power producers and against the PSPCL.”

“On February 18, 2020, I had given a detailed opinion with regard to two PPAs, signed with the Talwandi Sabo Power Limited and Nabha Power Limited, where I had pointed out the error/irregularities in the power requirement, quantities, based on which those PPAs were wrongly entered into. I had also, in detail, advised legal steps to reverse the financial effects of those PPAs,” he observed.

“Under these agreements, Punjab is to pay exceptionally high fixed charges to private thermal plants at Talwandi and Rajpura; much higher, when compared to the Reliance Energy owned thermal plant at Sasan. This plant was set up around the same time and is of a similar make as of Talwandi Sabo,” said Vinod Gupta, an expert in power sector and spokesman, All-India Power Engineers’ Federation.