The Kerala State Electricity Board (KSEB) had to cough up about ₹1,200 crore as annual fixed cost to National Thermal Power Corporation (NTPC) without drawing power from the corporation’s Kayamkulam plant.
The annual fixed cost was paid in honour of a power purchase agreement originally signed on January 6, 1995, which expired in 2013 and was extended for 12 years, till 2025, with a review option in February 2018.
A sum of ₹284.74 crore was paid as annual fixed cost in 2014-15, ₹288.93 crore in 2015-16, ₹296.69 crore in 2017-18 and ₹301.17 crore for the current year. The pact is valid till 2025 and does not have review option at present. That means, it would have to pay ₹1,400 crore for the next five years.
The board had to drain its coffers after striking long-term power purchase pacts spanning 25 years at competitive rates than the tariff of ₹13 per unit offered by NTPC. The long-term pacts had helped to avert power cut and load-shedding during the summer months.
But an intervention of the board has helped to mitigate the impact of the shock to a certain extent as the corporation has agreed to reimburse ₹360.04 crore from the fixed cost paid since 2014-15. But the commitment is being deemed as a bane for the cash-strapped utility that is wading through a fiscal crisis.
Board chairman N.S. Pillai had appraised the government of the issue in March and also convinced the need for scaling down the fixed cost, but the amount agreed upon by the NTPC was much higher than the proposal mooted by Mr. Pillai.
While the board offered to pay ₹168 crore, the NTPC reached a settlement and fixed it at ₹200 crore, but agreed to review the payment made in excess of the settlement in the current and previous years since 2014-15 and thus agreed to reimburse ₹364.04 crore. Though the settlement has offered a minor solace, no immediate solution seems to be in sight for an exemption from paying the fixed cost.
Power from the Kayamkulam plant needs to be drawn only to meet exigencies thrown up by coal shortage in generating stations or transmission corridor constraints. Though the plant is very rarely scheduled owing to the high fuel cost and the corresponding high variable cost of energy, the board had been paying the cost without drawing even one unit from the plant.
The Kerala State Electricity Regulatory Commission (KSERC) had turned down a board request to pay higher fixed charges as assessed by the Central Electricity Regulatory Commission in 2017 and suggested that the two entities work out practical solutions with the active support of the Central and State governments.