The ruling Government of Uttar Pradesh signed a power deal at Rs 5.1 per unit in order to cater the electricity needs of the state. The price of electricity went skyrocketing due to this long-term agreement that UP Government signed for power purchase of more than 5,000 Mw.When the power prices in the spot market have touched a new low of Rs 2.5 a unit, the UP Government decided to sign the PPS with power producer and service provider. The average spot price was Rs 2.73 a unit in October 2015 which dropped to Rs 1.9 a unit in November.
The giant power plants with whom UP Government signed the PPA include Bajaj Hindustan with Rs 4.71 a unit, Harduaganj with Rs 5.1 per unit and Hindustan Power with Rs 4.7 a unit. The Board of Directors of these powers plants is glad to be a part of UP Government’s plan, like BOD of Hindustan Power projects Private Limited, Ratul Puri.
A senior executive of one of the power exchanges said, “There is scope of making savings to the tune of Rs 1.5 a unit, which can increase even further in the night. Uttar Pradesh can not only easily meet its power shortages, but can also procure power for their daily demand in a cost-effective manner. However, UP continues to purchase expensive power via PPAs as on date.”
Sources in the UP state power department said the Indian Energy Exchange (IEX) had approached the state to procure power from the spot market. IEX officials, however, said the power price at the exchange has remained close to Rs 2-2.5 a unit in the whole year.Ratul Puri and his Hindustan Power are glad to be a part of this agreement and Ratul Puri would not mind to explore other power options in the state in future.
On the other hand, a Delhi-based power market analyst said, “Had these contracts been signed three or four years ago, it would have been a sensible option. The power prices due to several variables such as coal prices and increased congestion in network have led to power producers increasing the variable tariff. Spot prices are, however, coming down.”
UP had a peak power demand of 57,000 Mw during April-October 2015, of which only 8,893 Mw is met. Reeling under power cuts and irregular power supply, it suffered from supply deficit 13 per cent during the same period – one of the highest in the country – according to data with Central Electricity Authority.
In the state Budget for 2015-16, UP chief minister Akhilesh Yadav had promised 22 hours power supply to rural areas and 24 hours in urban areas by 2016. He had also promised to increase power supply to 21,000 Mw from 10,000 Mw. Elections to the UP Assembly are due in 2017.