IAS officer was put under pressure to buy a favoured firm’s power without tenders

Hasty exercise to sign PPA before formulation of power purchase policy draft hits a rock

Ahmed Ali Fayyaz

______

SRINAGAR, Oct 28: Efforts of a Rs 700 crore joint venture, comprising a Chennai-based firm and a Jammu-based business group, to sign the Power Purchase Agreement (PPA) for selling 100 mw of solar power to the Government of Jammu and Kashmir while bypassing the mandatory bidding route have run into rough weather, notwithstanding the unceremonious exit of the Principal Secretary Power Development Department (PDD).

In his note, flagged as ‘MOST URRGENT’, Shakti Pathak, Officer on Special Duty with Deputy Chief Minister Dr Nirmal Singh, had made it clear to Mr Nayak that his boss had taken the delay in signing the PPA with the firm “seriously”.

OSD’s note No: PS/HDCM/627/2015 Dated 06-08-2015 reads: “After lapse of more than three months in which the decision was taken, i.e. April 2015, no action seems to have been taken by the Power Development Department and Hon’ble Deputy Chief Minister has taken view seriously. As desired by the Hon’ble Deputy Chief Minister, Principal Secretary to Government is requested to take immediate necessary steps regarding signing the Power PPA with the developer so that work on 100 mw SPP at Chann Arrorian, Kathua, is executed by the agency”.

After the 1988 batch IAS officer Sandeep Nayak refused to sign the PPA with some influential politician’s favoured firm without determination of the rate through open tenders, he was transferred to the insignificant Relief and Rehabilitation department on October 19.

Dheeraj Gupta, who succeeded Nayak as Commissioner-Secretary PDD, told STATE TIMES that no PPA was signed with the joint venture promoters “Thein Venayak Energy”. Asked about its latest status, Gupta said “the proposal is where it was early this month”. “I was told that the department has taken the view that no such PPA could be signed without the obligation of competitiveness”, he said.

Chief Engineer Commercial & Survey Wing of PDD, Ms Shehnaz Goni, who is a key member of the Government’s Comprehensive Power Purchase Policy draft, revealed that the draft had been completed but it was being fine-tuned with certain additions. “We will be submitting the PPP draft to the Government after opening of Durbar in second week of November in Jammu. It will be adopted if approved by the Cabinet”, she told STATE TIMES.

According to the well placed bureaucratic sources, some of the influential politicians, including Ministers of BJP, were keen to have the PPA signed with the Government without going through the competition route and before the Comprehensive Power Purchase Policy draft would come into force. They disclosed that the vendor demanded the rate Rs 6.08/per unit to be fixed for the term of 10 years. Without waiting for an official draft, he had reportedly obtained a draft from West Bengal and wanted the PDD to sign the same with him without going for bidding.

Rate of Rs 6.08/per unit is in fact the benchmark capital cost fixed by Jammu and Kashmir State Electricity Regularity Commission (SERC) as per the Central Electricity Regulatory Commissions General Levellized Tariff which, for all private power purchases, is subject to competitiveness. Section 57 of SERC mandate ‘Determination of tariff by bidding process’ says: “Notwithstanding anything contained in Section 56, the Commission shall adopt the tariff if such tariff has been determined through TRANSPARENT PROCESS OF BIDDING in accordance with the guidelines issued by the Government.

J&K State’s annual power bill is around Rs 5,000 crore.

The company wanted to sell 100 mw of solar power to the State government from its Rs 700 crore 100 mw solar photovoltaic power plant at Chann Arrorian, Kathua. The company claims to have purchased 5,000 Kanals of land in Kathua and set up the plant after it was “sanctioned” by Department of Science and Technology on April 9, 2013.

A senior official of S&T Department said that sanctioning a private solar power plant as per the guidelines of Ministry of New and Renewable Energy of Government of India does not mean fixation of contract for buying the unit’s product. “The State gets involved only when it buys power from such a plant. If the company generates power and sells it to other clients or other governments, what’s our problem? They are free to sell it to anybody. We will buy only when we get it at the lowest price”, he said.

In July this year, Madhya Pradesh government invited bids for buying 300 mw of solar power. One hundreds bidders including Reliance Power, Adani Power, MK Welsun, Sun Edison and NHDC participated in the competition. The contract was allotted to Sky Power South East Asia Holding Ltd Mauritius which offered the country’s lowest rate of Rs 5.05/ per unit.

It was immediately after the PDP-BJP assumed office and Dy CM got the power portfolio that Thein India Energy Chennai’s local promoter Anirudh Chandel started efforts to get the PPA signed. He, according to sources, met among other Dr Singh and Minister incharge S&T Sajjad Gani Lone. PDD’s review meeting was fixed on April 21.

In the meeting which was chaired by CM and attended by Dy CM, Minister of Finance Haseb Drabu, Minister of S&T Sajjad Lone, Minister of Information Technology Imran Ansari and MOS IT Pawan Gupta, Mufti Mohammad Sayeed was told that the TIE’s solar power plant in Kathua had got “stuck” as the developer has not been able to sign PPA with the PDD. According to minutes of the meeting, CM desired that “PDD may facilitate signing of the PPA with the developer at the rates issued by SERC so that 100 mw solar power plant comes up without further delay”.

Interestingly, CM’s “desire that PDD may facilitate signing of PPA” was misinterpreted repeatedly by Ministry of Power. Not only the company in its communications to S&T Secretary Satish Nehru on June 30 but also Dy CM’s OSD in his note dated August 6 to Power Secretary sought to project CM’s “desire to facilitate” as the “CM’s Order”.

The company director had submitted a representation to CM. It was forwarded by Deputy Director (P) in CM’s Secretariat Madan Gopal Sharma to Power Secretary with the advice “to kindly take necessary steps for addressing the issues highlighted by the developer so that the first SPP in the State is set up as per schedule”. This communication No: FC/PRS/HCM/05 Dated 31-07-2015 was also misinterpreted by Ministry of Power as “CM’s Order.

Interestingly it was in the middle of the process that TIE Chennai entered into joint venture with Venayak Energy, Jammu. The agreement executed on July 21, 2015 says that TIE would invest 10% of the project expenditure and Venayak 90%. Profit distribution was also fixed in the same ratio. Thereafter one Adil Mustafa Khan, described as Venayak’s “representative” started pursuing the file. It was he who got a PPA draft from West Bengal, signed it on behalf of TIE-Venayak and pressed Power Secretary to sign it.

The most significant decision of the CM’s review meeting on April 21 was direction to constitute a Comprehensive Power Purchase Policy committee that would make a draft and submit it to Government in six weeks.

 

Rather than signing the PPA, Mr Nayak sought the views of CE Commercial & Survey who returned the file with some key recommendations. “The rates fixed by SERC are worked on various parameters and are quite high and do not represent the current market rates either for medium or long term basis unless a transparent bidding mechanism is adopted in the interest of State”.

CE C&S Wing concluded: “ In view of the above state facts, it is neither advisable nor in the interest of government to enter into such power purchase agreement with ‘M/S Then India Energy Pvt Ltd” binding the State for such a long term of 10-12 years with uncertainty of rates”.

On CE’s note, Mr Nayak sought the view of Commissioner Secretary Finance Naveen Choudhary. After thorough examination, Finance Department returned the file with the note that such an agreement could not be made with the vendor with going for bidding.

END