Deadline NTPC has to find buyers for 50% of power before Jan 6, union cabinet approval needed too before project can get under way

Bathinda : National Thermal Power Corporation (NTPC) may have signed the power-purchase agreement with Punjab State Power Corporation Limited (PSPCL) for setting up the 2,640 MW thermal project at Gidderbaha in Muktsar district, but there are still hurdles that may jeopardise the project. The foremost challenge is NTPC has to find buyers for all of the power generated before January 6, 2010. NTPC has already agreed to sell 50% of the power to Punjab, but it has yet to find buyers for the rest of it. It is mandatory to have power-purchase agreements in place for the entire production before a plant can be set up. The problem is that the union ministry of power has fixed January 6, 2011, as the deadline for signing of purchase agreements between power utilities and public-sector producers. After that, power would be purchased by the utilities only through competitive bidding, in which NTPC may or may not succeed. A notification of January 6, 2006, reads: “Even for public sector projects, tariff of [power from] all new generation and transmission projects should be decided on the basis of competitive bidding after a period of five years, or when the regulatory commission is satisfied that the situation is ripe to introduce such competition.”

However, NTPC is still hopeful. An official of the corporation said they were looking for beneficiaries in the northern part of the country and expected to clinch the deals very soon. “We still have 15 days to go.“ Meanwhile, Padamjeet Singh, a power sector expert, said NTPC could ask for reduction in the generation capacity if it failed to find buyers for the rest of the 50% power. Interestingly, NTPC was initially negotiating to keep Punjab's share in the power at even less than 50% of the generation, while keeping the rest for what they call “merchant sale“. Besides NTPC's sale agreements, another hurdle to be crossed before the project can be set up is clearance from the union cabinet. A senior PSPCL official said in case the Centre asked for any reduction in Punjab's share of 50% power, the NTPC agreement with the state would be rendered null and void.