Companies may get more time to sign PPAs under mega power policy

New Delhi: The government is considering extending the timeline by 2-3 years for power projects awarded under the Mega Power Policy that are yet to sign power purchase agreements (PPAs) or have signed partial pacts with distribution companies, people close to the development said.

The proposed extension will give power plants more time to sign PPAs and get their bank guarantees, which stand at around ?4,000 crore, released, one of the persons said.

The move is likely to benefit at least six power plants with a total planned capacity of around 8 GW, but the capacity remaining to be tied up is around 4 GW, because PPAs have either not been signed or partially signed, according to the person.The deadline for the signing of the PPAs for some projects ends in the current and next year, depending on the project and the date of import of equipment.

The plants include those of DB Power's Baradhara unit, Adani Power's Raikheda unit, and RKM Powergen's Uchpinde unit in Chhattisgarh, and IL&FS Tamil Nadu Power's Cuddalore unit, according to the person quoted above.

DB Power and RKM Power could not be reached for comments, while Adani Power and IL&FS Tamil Nadu Power did not respond to an e-mail sent by ET till press time."States did not issue enough bids due to which PPAs were not signed," the person quoted above said.Another industry official said that with power demand improving, states are showing a willingness to sign long-term power purchase agreements compared with the pre-Covid period. This also resonates with the government's plan to bring more capacity on board to meet rising demand.Extensions to the timeline for PPA signing and furnishing documents to avail benefits under the policy have been provided earlier as well for all projects. The last extension was in 2022 for three years after an extension in 2017 for five years.

The 2009 mega power policy promised exemption of customs duty on equipment and excise duty benefits to 25 power projects of 30,000 MW capacity that signed long-term power purchase deals. However, limited power procurement tenders from states led to a few extensions of the deadline to give developers more time for compliance.Of the 25 plants, many have already signed PPAs and hence the extension does not apply to them, the person quoted above said.

The mega status was provided to thermal plants of over 1000 MW and hydro plants of 700 MW. These plants, however, had to fulfill some provisions including long-term PPAs of 85% of power produced.

Apart from fiscal concessions like zero custom duty for import of capital equipment for the power projects, the policy also envisaged benefits to the domestic bidders and income-tax benefits.