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HomeStateDraftWhy state-owned electricity firms are under a cloud in power-surplus Punjab

Why state-owned electricity firms are under a cloud in power-surplus Punjab

The Punjab govt's decision to redevelop the land on which its oldest power plant, shut down in 2018, stands has brought out old concerns.

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Chandigarh: Former employees of Punjab’s state-owned Guru Nanak Dev Thermal Power Plant in Bathinda staged a major protest last week against the government’s decision to redevelop and sell the land on which it is built. 

The plant is the oldest in this state, with its first unit commissioned in the 1970s. But it was shut down in January 2018 amid the state government’s efforts to phase out thermal power plants older than 25 years over emission-related concerns, in line with central government guidelines. Its employees were accommodated at other plants.

However, the government’s redevelopment plan for the 1,764-acre plot has brought out longstanding concerns among several sections about what is seen as the administration’s abandonment of state-owned plants in favour of private players.

Despite being a power-surplus state, Punjab has among the highest electricity charges in the country, at Rs 8.37 per unit for domestic users. The high charges have often been attributed, among other factors, to the agreements signed by the erstwhile Shiromani Akali Dal (SAD)-Bharatiya Janata Party (BJP) government to allow private players to set up plants in Punjab. 

The agreements call on the government to pay a fixed charge to the players whether or not it purchases any electricity from them. This, experts say, has led the government to buy power from private players to rationalise this payment — said to be totalling Rs 4,000 crore a year — often at the cost of state-run plants, where production is allegedly dwindling. 

This has led to concerns among employees of state-run plants about the longevity of their jobs.

In 2017, the Congress came to office in the state with a promise to renegotiate the agreements and restore the Bathinda plant. The Amarinder Singh government promised a white paper this January to expose the “alleged fraud” in the agreements. 

But even the Congress has come under fire for doing nothing to address the problems plaguing the plants, despite making the alleged fraud in the agreements a campaign issue. 

Also Read: Another fight brewing as Punjab demands Haryana gives it more space in Vidhan Sabha building

A power-surplus state

Punjab’s state-owned thermal power plants include one at Ropar, which has four units with the capacity to generate 210 MW each. Initially, it had six units, but two were de-commissioned along with the Bathinda power plant. Its first unit was commissioned in 1984 and the last in 1993. 

The other government-run power plant stands at Lehra Mohabbat, which has two units of 210 MW each, commissioned in 1997-98, and two units of 250 MW each, commissioned in 2008. 

With these two plants, the government’s power generation capacity is 1,760 MW. Both plants are run by the Punjab State Power Corporation Limited (PSPCL).

There are three private thermal plants in the state with a combined capacity of 3,920 MW. One of them, commissioned at Rajpura in 2014, has two units of 700 MW each. The second plant, functioning since 2013 at Talwandi Sabo, has three units of 660 MW each. The third plant is located at Goindwal Sahib — it was also commissioned in 2013 and has two units of 270 MW each.

Apart from this, the state can produce 1,300 MW through renewable sources of energy — hydro, solar and biomass — taking Punjab’s total power generation capacity to 7,000 MW.

According to Vinod Kumar Gupta, spokesperson of the All India Power Engineers Federation, a nationwide union, Punjab produces more power than it consumes for eight months of the year. The peak season lasts four months in the summer when paddy is sown.

“Punjab is power-surplus and the entire demand is being met by private thermal plants. Punjab’s own power plants were commissioned much before the private players came in. But the government prefers to buy power from private plants because it is paying them fixed charges,” Gupta said. 

“This faulty clause is the reason that, one by one, the government’s own power plants will close down in the manner that the Bathinda plant was shut down,” he added.

Punjab, Gupta said, often struggled to find buyers for its excess power.

“Although Punjab banks power with other states during low- consumption months and also tries to sell it, but with so many power plants coming up across the country, the demand for power per se has gone down,” he added. “Also, the rate at which Punjab is ready to sell power is higher than what is generally available to other states from the exchange (national grid, which facilitates exchange of electricity around India).” 

As a result, say insiders, including those within the government, the two state-run thermal plants are used to generate power for less than 30 days in a year.

Gupta said the “adverse implications” of setting up private thermal plants in the state “have already come to the fore as the plant load factor (a performance parameter) of the government’s thermal facilities has already dipped to abnormally low levels”. 

“Punjab is neither able to consume power within the state nor sell power to others outside,” he added.

“There are apprehensions that government plants will remain on forced shutdown to pave way for private sector generation,” said Gupta.

A top officer in the PSPCL acknowledged these concerns. “Following the sharp dip in the demand for power during the lockdown, the possibility of the government’s own power plants becoming functional has become almost nil,” the officer said.

“In the past few months, the power plant at Ropar and Lehra Mohabbat have run for barely 15 days.”

However, A. Venu Prasad, the chairman cum managing director of the PSPCL, made light of worries about the government-run plants’ imminent shutdown.

He said there is “no proposal whatsoever to decommission any of the government’s thermal plants”. “The employees working in these plants need not fear losing jobs,” he added.

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‘Faulty agreements’ 

At the heart of the concerns about the state’s electricity generation situation is a years-old controversy surrounding the power purchase agreements (PPA) signed by the Punjab government with the private parties that set up the thermal plants during the tenure of the Shiromani Akali Dal-BJP government. 

“The PSPCL was saddled with surplus power capacity… The PPAs included a ‘deemed generation’ clause that requires the PSPCL to compensate the private parties for their fixed charges, irrespective of whether they supply power or not,” Gupta said. “The amount the PSPCL needs to pay private developers towards deemed generation runs into more than Rs 4,000 crore annually even without getting a unit of power. This burden is passed on to consumers.”

While the state currently charges domestic consumers over Rs 8/unit, the cost was lower by Rs 1.5-2 five years ago.

The state first decided to go in for private participation in power generation during the 2002-2007 Captain Amarinder Singh government.

A PSPCL employee said Punjab experienced an additional power demand of 2,000 MW — and the Amarinder Singh government allowed clearance for private players to set up facilities with a capacity of 2,000 MW.

“However, the private players… brought in were allowed to generate almost 4,000 MW, double of what was really needed. The power generation agreed to in 2006 was enhanced in 2007, when the Shiromani Akali Dal-BJP government came in,” the employee said.

Gupta noted that the “setting up of thermal plants was allowed under the MoU (memorandum of understanding) route and not competitive bidding”.

The Aam Aadmi Party (AAP) has criticised the state’s Congress government for letting the Bathinda plant shut down.

“There was no need to shut down the Bathinda power plant. Between 2005 and 2014, Rs 734 crore was spent on the international upgradation of the Bathinda Thermal Plant,” said AAP MLA Meet Hayer at a protest against the redevelopment plants last week in Chandigarh.

He added that the plant was last upgraded in 2014, at a cost of billions of rupees, but “shut down before it could run for 100 hours, even though its term was until 2030-31, according to the National Electricity Authority”.

Punjab Finance Minister Manpreet Badal, however, has defended the decision, saying the plant was shut down three years ago due to environmental, economic, and administrative issues. 

Speaking to the media on 23 June, he said shutting down of the “loss-making and smoke-spewing” plant will provide a windfall for Punjab, and pave the way for the creation of the state’s largest industrial park. The recently approved plan regarding the redevelopment of its land, he said, “will revitalise and rejuvenate the economy of southern Punjab”. 

Also Read: High tariffs, zero production — MSMEs want electricity charges waived as breather

‘Why have PPAs not been renegotiated?’

Before the lockdown started, the PPA issue was threatening to transform into a major political storm.

Both the ruling Congress and the AAP have lashed out at the erstwhile SAD-BJP government for selling the interest of the state’s consumers by signing these PPAs while sounding the death knell for the Punjab government’s own power plants.

The AAP has also been reminding the Congress that it had, in its election manifesto, promised to renegotiate the PPAs signed by SAD-BJP. 

“Manpreet Singh Badal had promised to re-start the Bathinda Thermal Plant, by scrapping the PPAs with private power companies soon after assuming power in the 2017 assembly elections but has backtracked on his promise,” said AAP MLA and Leader of Opposition Harpal Singh Cheema at the party’s Chandigarh protest last week.

In February, AAP state president and MP Bhagwant Mann had issued a warning to the Captain Amarinder Singh government — if it failed to terminate the power purchase agreements during the budget session, the AAP would be forced to cut power to Captain’s Moti Mahal palace on 16 March.

He alleged that the Capt Amarinder Singh government had entered into a secret pact with private power companies, “like the Badals (SAD), which is why it neither got the accounts of power companies audited nor revoked the one-sided PPAs even after being in power for more than three years now”.

In January this year, the chief minister had announced his government’s intention to bring out a white paper to expose the “alleged fraud committed by the Akalis in signing the PPAs with private players during their regime”. 

The paper, he said, would reveal all the documents signed by the previous SAD-BJP regime on PPAs, which caused an undue burden on the state.

In March, during the debate on the budget in the Vidhan Sabha, the chief minister said the draft white paper was ready, but more work was needed on it before it could be tabled in the house. 

Waving the draft document, Captain Singh said his government was committed to ensuring more affordable power to domestic consumers while continuing with the subsidies for farmers and industry. The existing PPAs needed to be thrashed out in detail for this purpose, he added.

Under attack, SAD president Sukhbir Singh Badal had in January challenged the Amarinder Singh government to cancel the PPAs. 

“When the SAD-BJP government took over the reins of the state, it decided to approve the establishment of private power plants as per the guidelines of the Dr Manmohan Singh government,” he told mediapersons.

“Due to zero investment in the power sector by the previous Congress government there was a huge power deficit. Domestic consumers were facing power cuts of six to eight hours daily and industrial supply was shut down for three to four days a week. Even paddy crop received supply for only four to five hours daily,” he added.

“A huge cost of Rs 22,000 crore was needed to create generation facilities, so it was decided to go in for private power generation. Free, fair and transparent bids were invited… Anyone accusing us of signing the wrong PPAs with private companies is in fact accusing Dr Manmohan Singh of preparing a faulty PPA as we followed central directives word for word.”

Also Read: Why it’s always sunny in India’s renewable power market


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