Ensure transparency in power purchase agreements

The government's moves to address the power shortage in Keralam have become controversial due to a lack of transparency. Chief Minister VD Satheesan's announcement that the state will purchase power from the private platform GNA Energy until March 31 to resolve the crisis has triggered a fresh controversy. Earlier, the KSEB and Electricity Minister Sunny Joseph had announced that power would be supplied from Himachal Pradesh. However, the Chief Minister says that purchasing power from Himachal Pradesh would entail an additional financial liability of Rs 2,232 crore, while GNA promises a higher supply during peak hours. However, the Electricity Board's own letter confirms that the Chief Minister's arguments contradict the figures submitted to the government by the KSEB. The letter states that financial burden would be higher if power is procured from GNA and further that Himachal Pradesh is the one promising a higher supply during peak hours. Moreover, the opposition, which considers the Chief Minister's statements on electricity costs to be contrary to the facts, has turned this into a major political allegation. Opposition leader Pinarayi Vijayan alleged that the Chief Minister was preparing for a mysterious deal by artificially creating a power shortage in the state. He has also demanded that the details of the agreement with GNA be made public. The Chief Minister's direct intervention, contrary to the statements and decisions of the minister in charge of the department and the Electricity Board, lends credence to these allegations.

The state is going through a severe power crisis of a kind not witnessed in the recent past. It is clear that the crisis has been caused by natural factors such as climate change and inadequate rainfall, as well as the absence of a new power purchase agreement. The temporary solution is to buy additional power from outside the state. For this purpose, the KSEB was tasked with examining the proposals submitted to the government. The main task was to evaluate the offers from Himachal Pradesh and GNA and choose the more favourable one. Purchasing power from GNA would cost Rs 1,566 crore. However, if Himachal Pradesh supplies electricity at the current rate of Rs 12.50, the cost would be only Rs 1,105 crore. Even if the rate increases by Rs 2, the cost would be only Rs 1,281 crore. In other words, the deal with GNA would cost an additional Rs 285 crore to Rs 461 crore. Moreover, while an average of 900 MW could have been procured from Himachal Pradesh, only 500 MW would be available through GNA. Additional power would then have to be purchased from outside to meet peak demand which will require another Rs 450 crore. Furthermore, GNA's contract does not provide for power supply in April, whereas Himachal Pradesh's contract covers that month as well. In short, the figures available indicate that purchasing electricity from GNA would entail an additional liability of at least Rs 730 crore. All these points were raised by the minister in charge of the department a few days ago. However, setting aside these details, the Chief Minister attempted to highlight the better 'offer' by comparing Himachal Pradesh's rate of Rs 14.50 with GNA's rate of Rs 8.63.  It is this discrepancy in the figures that the opposition has seized on as a political weapon.

There is also the question whether the current power purchase agreement has the approval of the Regulatory Commission. The law stipulates that electricity cannot be purchased without following the tendering process or obtaining regulatory approval. Under Sections 62 and 63 of the Electricity Act, the purchase price must be determined either through a method approved by the Regulatory Commission or through competitive bidding. Last month, steps were taken to purchase electricity from VEH Global and Himachal Pradesh based on the offers received, rather than through a tendering process or as part of the regulatory procedure. Continuing this practice in the case of GNA would be undesirable by any measure. It is also noteworthy that the Regulatory Commission has a different assessment of the power shortage. According to the figures available with the Regulatory Commission, substantial amounts of electricity should be available from the SECI solar project, battery storage capacity and central allocations from the current month until March. These sources do not figure in the Chief Minister's assessment of the power shortage. Alternatively, if the state's requirements are met and additional electricity is supplied from power plants such as Sinnar, the situation could be managed without any difficulty until April. In this context, the question of why an agreement with GNA was signed in haste cannot be brushed aside. Considering that GNA is not a power generation company but merely an OTC platform, it must be said that the agreement lacks transparency. The Chief Minister, therefore, has a duty to answer the questions and doubts raised by the opposition and experts in the matter.