NEW DELHI: The government is considering reducing the tenure of power purchase agreements (PPAs) for future gas-based projects by 10 years and reviewing the deals every five years on basis of fuel availability, officials said.
The move, if implemented, will benefit 9,000-mw plants of companies like Reliance Power, Lanco Infratech and GMR Energy, when they sign power purchase agreements after gas supply is available. They will be able to review their power supply agreements every five years according to the gas supply and their commitment will be for a less number of years.
A power ministry official said a proposal to reduce long-term PPAs to 15-18 years from the current 25 years has been mooted after consultations with stakeholders on new model bidding documents for projects. “We are looking into recommendations made by the CEA and various stakeholders,” he said on condition of anonymity.
The proposal is in line with recommendations made by the Central Electricity Authority (CEA) that duration of PPA for gas based projects needs to be brought down in view of their economic life. The authority has also suggested that the PPAs should be reviewed every five years since gas is generally allocated for that period.
CEA has also proposed other policy changes like mandatory purchase of gas-based power by distribution companies, passing on fuel availability and price risks to consumers and extending fiscal benefits to gas based power projects.