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80% of power plants at risk of default

Warning that 80 per cent of the country`s power plants face the risk of a default due to coal shortages and environmental issues.

New Delhi: Warning that 80 per cent of the country`s power plants face the risk of a default due to coal shortages and environmental issues, a body of power producers
has petitioned the government for an expert group to review contracts awarded under through the competitive bidding route.

"An institutional arrangement (possibly an EGoM or an expert group) may be set up by government to carefully evolve the principles and mechanisms to revisit the contracts, duly holding the developers accountable for aspects in their control, but finding practical ways for treating aspects that are not," Association of Power Producers Director General Ashok Khurana said in a letter to the Planning Commission.
Signals have already emerged of plants defaulting from their current obligation, primarily due to fuel shortages and environmental issues.

The situation is expected to worsen further, with 80 percent of plants likely to default on account of the shortfall in domestic coal availability; environmental issues involved in captive coal blocks; and change in law regulations in the coal exporting countries, the letter added.
In the last five years, the scenario has changed drastically due to the various developments such as an acute coal shortage looming in the power sector, changes in the laws for coal exporting and environmental issues, among other things , which necessitated a re-look at the bidding mechanism.

The competitive bidding framework in the power generation segment was introduced in 2005. Over the past five years, state electricity distribution companies have contracted over 42,600 MW capacity through the competitive bidding route.

The Association of Power Producers is a representative body of majority of the private power developers in the country with nearly 1,20,000 MW of power projects (in various stages of development and operation) under its belt.


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