Punjab CM Channi gives nod to terminate PPA with GVK Goindwal Sahib Power Limited

Chandigarh (Punjab) [India], October 30 : Punjab Chief Minister Charanjit Singh Channi on Saturday approved the Punjab State Power Corporation Limited (PSPCL)'s proposal to terminate GVK Goindwal Sahib (2x270 MW) Power Purchase Agreement, informed the Chief Minister's Office (CMO).
In a statement, CMO said, "Punjab CM Charanjit Singh Channi today approved the Punjab State Power Corporation Limited's (PSPCL) proposal to terminate GVK Goindwal Sahib (2x270 MW) Power Purchase Agreement (PPA). Subsequently, PSPCL has issued a termination notice to the company."
Notably, a preliminary default notice has been served by PSPCL to GVK today for cancellation of PPA due to high power cost and falling lowest in the merit order, procurement of energy from GVK that had been restricted only within the range of 25 per cent to 30 per cent during most of the times of a year resulting in higher tariff of about Rs 7.52 per unit for last year.
Pointing out further, CM Channi said that this step had been taken to safeguard the interest of consumers of the state by way of reducing the burden of costly power.
A spokesperson of the Chief Minister's Office said, "The basic premise of entering into PPA by GVK with PSPCL was to provide cheaper power to PSPCL. GVK had been generating energy by arranging coal from Coal India Limited under SHAKTI Policy. As per PPA, GVK was required to arrange a captive coal mine but it failed to do so, even after lapse of more than five years of synchronisation with the grid."
"The capacity charges are being decided by Punjab State Electricity Regulatory Commission (PSERC) based on the capital cost of around Rs 3,058 crore, which is equivalent to about Rs 1.61 per unit of fixed cost. Going against this decision, the GVK had moved to Appellate Tribunal for Electricity (APTEL) for claiming the higher fixed cost to the tune of Rs 2.50 per unit based on claims of the capital cost of about Rs 4,400 crore which is pending adjudication."
The Spokesperson pointed out that as per claims made by GVK, the variable cost is around Rs 4.50 per unit and the fixed cost is around Rs 2.50 per unit. Thus, the total claim of GVK under tariff comes out around Rs 7.00 per unit which increases further due to the surrender of its costly power.
"Therefore, the intention of GVK is clear that it requires charging a higher tariff which is not the basic premise on which PPA was entered into with PSPCL. This has created a commercially un-viable for PSPCL to continue PPA with GVK," he said.
"Moreover, the GVK had defaulted for not clearing dues accrued to it timely, against the loans taken by it from various lenders. Consequently, it had become a Stressed Asset and a resolution plan was required to be implemented by GVK which failed to do so. Accordingly, lenders have approached National Company Law Tribunals (NCLT) for a resolution plan for GVK which is under consideration before the Tribunal, the Spokesperson revealed," he added.