Active Issues

Signing of FSAs for the following projects

  • i) Projects covered in the list of CCEA approved projects of 78000 MW whose COD dates have been revised beyond March, 2015 as per list circulated by CEA.
  • ii) Projects beyond the list of CCEA approved capacity of 78,000 MW, having valid LOAs and with expected COD in FY 2015-16 and FY 2016-17.
  • Further, policy guidelines regarding the quantum of coal supplied under linkages/LoA post 31st March 2017 are still not in place. Considering the improved coal availability scenario, entitlement of coal supply under FSA after 31st March 2017 should be restored to the original level as per LoA.

The new policy framework should factor in the time gap between the allocation of linkage and commencement of power supply (2 to 3 years). Further the following categories need to be kept outside the purview of new framework in view of earlier commitments and the fact that they have concluded PPAs.

  • i) Projects which have already been granted long term linkage/LoAs- 1,08,000 MW ii) CCEA approved capacity of 4,660 MW and other similarly placed projects with concluded PPAs. iii) Prior coal block allottees who are unable to secure mines in ongoing auction process and have concluded PPAs. iv) Other projects with concluded PPAs.

Non conclusion of long term PPAs caused by paucity of bidding opportunities and non-finalization of bids in initiated processes.

  • The requirement of a long-term PPA for release of coal under FSA is a post-facto condition and was not stipulated at the time of signing of the FSA or at the time of conceiving the project. This amounts to retrospective policy implementation, which is not in the larger interest of investor sentiment.
  • There is a severe shortage of bidding opportunities for long term power procurement as evidenced by the fact that in the past year only 3 states have initiated such bidding processes.
  • Even in these few cases where States have invited bids for long term power supply, the PPAs are not being signed or are being delayed significantly. In the last 3 years, bids of over 36,000 MW have been submitted, out of which only around 4,000 MW have been concluded.

APP Suggestions:

  • Mandatory fulfillment of procurement process – In the next FOR meeting, it may be requested that SERCs should mandate Discoms to initiate the bidding process for power procurement as per their demand projections. Further, once the bidding process is initiated, the Discoms may be further mandated to sign PPAs for the requisitioned quantum within the time period as specified in the Competitive Bidding Guidelines once the bids are received.
  • Creation of price discovery validation/benchmark mechanism - If the price discovery process has been carried out as mandated under the Competitive Bidding Guidelines, the bids received should be accepted as that is mandated ‘price discovery’ mechanism. Non acceptance of price discovery through an open bidding makes a farce of the tendering process. To guard against this, we propose two mechanisms:
  • Price validation mechanism for bids already concluded - In case the States feel that the bids received are on the higher side, they can ask the Regulator to examine the cost and fix the tariff as per Section 62 principles outlined by the specific SERC (this is the cost that the utility would need to pay in case NTPC/State Genco sets up the plant). In case the bid price is lower, then the PPA may be signed at the bid price and if the tariff obtained under Section 62 is lower, then the option may be given to the bidders (in order of priority as per the bids received, starting from L1) to match the Section 62 tariff.


Difficulty in converting provisional mega status to final mega status due to requirement of 85% capacity to be tied up under competitive bidding

The requirement of signing long term PPA on competitive basis for 85% capacity for availing Mega Power benefits is impractical due to:

  • Lack of fuel assurance corresponding to 85% capacity – As per the present coal allocation framework, the trigger level for coal supplies under FSA is limited to 80% of 90% of 85% PLF, ie 61.2% PLF.
  • PPAs signed with States as directed by the States themselves – Many host states have insisted for sale of significant quantum of power (around 30% of the installed capacity) in lieu of facilitating the use of land, water and other considerations for setting up the project in the State. In these scenarios, the developers had no alternative except to accept the stipulations and supply power as mandated by the host State.
  • Non-availability of competitive bidding opportunities in the market.

APP Suggestions:

  • Requirement for tying up PPA may be made proportional to the assured fuel supply level (61.2% of installed capacity for coal based plants and for gas projects this requirement may be waived entirely)
  • PPAs signed with the host States as mandated by the State Governments should be considered as valid PPAs for fulfilling the condition of Mega Status.

Operationalization of CCEA decision on pass through of additional cost to meet the deficit in supply of CIL (either by way of imports or e-auction coal)

  • CERC in its advisory to MoP had suggested necessary changes in the NCDP and Competitive Bidding Guidelines for developers to claim change in law. Subsequently CCEA vide its decision on 21.06.13 directed as follows: “MoC to issue suitable orders supplementing the New Coal Distribution Policy (NCDP).MoP to issue appropriate advisory to CERC/SERCs including modifications if any in the bidding guidelines to enable the appropriate Commissions to decide the pass through of higher cost of imported coal on case to case basis”.
  • However MoP in its directive to the regulatory commissions has only referred to the amendment in the NCDP without bringing out any amendments to the Competitive Bidding Guidelines. The developers are now expected to approach the respective State Electricity Regulatory Commissions for considering their affected projects on a case to case basis. In light of the above mentioned advice of CERC regarding the suggested changes in the bidding guidelines, one cannot rule out the possibility of SERCs raising this technicality and thereby delaying the process by another 6 months at the minimum.

APP Suggestions:

As per informal feedback received, regulatory commissions would require appropriate amendments in the Competitive Bidding Guidelines for the decision of the CCEA to take effect. MoP is requested to expedite appropriate amendments in the CBG so as to avoid any further delay in operationalizing the decision taken by the CCEA on ground of any avoidable procedural technicalities.

  • MoC has taken an arbitrary decision in not recognizing medium term PPAs for coal supply. The Hon’ble Minister had informed the Advisory Group members that he has taken up this issue with the Ministry of Coal. However it has not been brought to satisfactory fruition.
  • Securing power procurement through medium term PPAs is essential for the power purchase planning of the Discoms. Medium term PPAs allow them to meet the requirement for 3-4 years till the plants under construction come into operation, and these PPAs are recognized under the power sector regulations.

APP Suggestions:

All forms of long term PPAs and medium term PPAs are binding commitments and should be recognized for supply of coal under FSA.


  • GAIL has expressed its inability to arrange adequate e-bid RLNG required under swapping arrangement to IPPs located in AP as per the rostering plan provided by each successful bidders in the state of AP. The success of this scheme essentially hinges on GAIL arranging sufficient gas for AP based power plants.
  • Post the meeting held on 8th July, 2015 with Hon’ble MoSP, the co-mingling notification has been issued by Ministry of Finance. However, the states who have to reduce VAT on the basis of this notification are yet to initiate necessary steps.
  • The Service Tax exemption was under the 11 relaxations made by the Cabinet and the relevant notification has been issued by Department of Revenue. However, RGTIL still continues to charge service tax which results in increase of retail tariff and the subsidy burden on the Government.
  • Till date none of the power developers under E-bid RLNG scheme has received PSDF support for the power sold to Discoms. MoP to stream line the process for releasing the payment on time.

Relaxation in Accounting Standards AS10 and AS16 on account of the of the unprecedented difficulties affecting the power sector at present due to unavailability of adequate fuel and in the absence of adequate Policy and Regulatory measures to resolve the fuel crisis

APP Suggestions:

  • Relaxation in Accounting Standards AS10 and AS16 to allow:
    • Capitalization of all units together
    • Capitalization of all direct and indirect expenses incurred till delayed COD
    • Capitalization of all borrowing costs till delayed COD

i) 5/25 restructuring of long term loans – This facility is only open to commissioned projects and there is no rationale of denying this facility to under construction projects. This should also be extended to projects where restructuring has happened once before.

Cost overrun funding - i) Increasing the ceiling of 10% on cost overrun funding without treating it as restructuring ii) Financial Institutions (FIs) to be encouraged to participate in Cost overrun funding and to adhere to the Terms of Sanction by the Lead Member in line with the JLF decisions.

  • Extension of DCCO date – For thermal power projects, the existing relaxation of 1 year in DCCO for reasons beyond the control of developers may be increased to 2 years and for hydro projects, the present limit of DCCO +2 years may be extended to DCCO +4 years.
  • Allowing PFC/REC to participate in refinancing – MoP to formulate framework to allow PFC/REC to participate in refinancing both in terms of elongation of tenor and reduction of interest in line with the consortium and in case PFC/REC are unable to participate in refinancing, then prepayment charges should not be applicable.

Non conclusion of long term PPAs caused by paucity of bidding opportunities and non-finalization of bids in initiated processes.

  • Inter-Regional
    • 1. Transmission Congestion exists between NEW Grid and S.R Grid and the scenario is expected to deteriorate further in future as more and more generation is added in NEW Grid coupled with increase in shortages in SR due to less gas availability.
    • 2. Due to the above, Market splitting occurs regularly in Power Exchanges resulting in skewed price discovery. It prohibits merit order operation.
    • 3. Above congestion also does not allow traders to book corridor in advance. Advance corridor allocation has also been affected due to above congestion and SR states cannot book corridors even in advance by advance load-generation balance planning. The allocation has come down to a level of one-fifth of the application resulting in e-bidding and consequent increased transactional cost for power transfer to SR.
    • 4. Due to the above, there is stranded generation capacity in NEW grid,whereas high shortfall remains in SR grid.
  • Intra-Regional
    • 1. In addition to above inter-regional congestion, there is regular congestion happening in W3 region too. Maximum power that transmission lines can carry out of the W3 region is 9000 MW and after accounting for LTOA/MTOA capacity, there is hardly any capacity left for Short Term Open Access.
    • 2. The quantum of unscheduled power will further increase in the year 2013-14 with the synchronization of new Power stations in W3 Region, leading to large stranded generation capacity.

APP Suggestions:

  • Inter-Regional
    • The situation is expected to improve with the synchronization of NEW Grid and SR Grid with the commissioning of the 765 KV Raichur-Sholapur D/C line. However it us understood that this line is facing delays in implementation and MoP is requested to take appropriate action to ensure timely commissioning of this line as per its scheduled target of January 2014.
  • Intra-Regional
    • 1. The intra-regional situation is expected to improve with the commissioning of the following corridors which will increase W3 region export capability:
      • a. 765 KV Jharsuguda-Dharamjaygarh-Jabalpur corridor (Scheduled completion – March 2014)
      • b. 765 KV S/C Raigarh Pooling Station (near Kotra) – Champa Pooling Station (Scheduled completion – May 2014)
      • c. 765 KV S/C Champa Pooling Station – Dharamjaygarh line (Scheduled completion – May 2014)
    • 2. It is understood that there are delays in the progress of the above and MoP is requested to take appropriate action to ensure timely commissioning of the above lines and pooling stations as per their schedules in order to ensure augmentation of power export capacity from W3 region.
  • Along with the review of the DBFOT documents for UMPP/Case 2 projects as being carried out by the Expert Committee under Shri Pratysh Sinha, a similar review is also required for the DBFOO (Case 1) documents. Some of the major concerns that need to be addressed are:
  • Open Capacity – This creates ‘inherent stranded capacity’ and will lead to loading of fixed Charges on the Utility entitlement. Needs to be removed.
  • Obtaining Long Term Open Access – As the grant of LTOA is not within the reasonable control of Supplier, the non-grant of LTOA may be treated as a Force Majeure event affecting the obligations of the supplier.
  • Matching of lowest tariff – Other bidders should not be asked to match L1 as each project has unique characteristics in respect of plant location, technology, capital cost, fuel source & distance, financing means, operational efficiencies etc, which have bearing on both fixed and variable components of tariff.
    • Technical and Operating norms – To ensure that all generating plants operate uniformly in the same ecosystem, all technical and operating norms should be aligned with CERC Regulations.
    • Disallowing bids from multiple plants of same bidder i. Restricting a bidding company to quote from only one plant denies the opportunity to tie up power supply from other plants even if the developer can offer a more competitive tariff. ii. Case 1 bids are called for specific capacities. Any bidding company with different projects should have the flexibility to tie up individual untied capacities within the total bid capacity. iii. Permitting multiple projects of a bidding company does not in any way restrict or skew the competition because the tariff quoted by other bidders.
    • Allowing sourcing of alternate coal till operationalization of captive blocks - In case of delay between scheduled mine production date and commencement of power supply under PPA, the Bidders should be allowed to quote the cost of alternate coal required during such interim period. Bid evaluation to be performed on the basis of pre-specified cost of alternate coal mentioned in the bid documents and payment to be on actuals.