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Higher tariffs power purchase agreement scheme positive for IPPs: ICRA

The rating agency ICRA has said the completion of the second round of medium-term power purchase agreement (PPA) auctions along with the slightly higher tariffs discovered is positive for the independent power producers (IPPs). However, the agency said signing of sale agreements with discoms remains crucial. The Ministry of Power recently completed the reverse auction under the second scheme for procurement of 2.5 GW from operational coal-based power projects having no power purchase agreements for a period of three years.

ICRA highlighted that the lowest quoted tariff under this scheme was at Rs 4.41 per unit, which is slightly higher than the Rs 4.24 per unit discovered in the first medium-term PPA scheme, wherein 1.9 GW was tied up.  It said 'the tariff discovered is largely in line with the cost of generation for a recently commissioned coal-based power project having capital cost of Rs 7.0 crore to 7.5 crore per MW and with part availability of coal under long-term domestic linkage.'

The government had brought this scheme last year in April to give relief to those coal-fired power plants which were operational but starving for coal in a the absence of any PPA with discoms. The PPA is a prerequisite for getting fuel linkage or supply under the existing legal framework.

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