NTPC, Chhabra deal deadline set to be broken; here is why

The deadline for the memorandum of understanding (MoU) for NTPC to take over Rajasthan’s 1,660 MW Chhabra power plant has been extended till September from May. Sources aware of the development said that NTPC and Rajasthan’s state electricity boards have not agreed on the tariff at which the plant would be selling power to the state after the proposed NTPC take-over.

Sources said that NTPC had earlier claimed that power prices would come down by more than 30 paise/unit after NTPC starts operating Chhabra. In order to improve the plant’s functioning, NTPC agreed to renovate and modernise the plant. However, it was found that modernisation of the plant would raise tariffs by about 10 paise/unit, sources said. Currently, the Chhabra plant sells power at R3.42/unit. The plant had operated at a plant load factor (PLF) of 78%. However, in May it operated at a low PLF of 51.4% and produced 382.7 million units (MU) in against the target of 783 MU.

Other sources added that Rajasthan distribution companies are not willing to sign power purchase agreement (PPA) with NTPC at the new rates. NTPC has asked the state to guarantee at least a minimum amount of power offtake, which would make it viable for NTPC to run the plant. Rajasthan utilities have not agreed to the proposal yet. Instead, they insist on buying power from Chhabra as per the merit order list. Sources said that since tariffs would go up after renovation works, chances of selling power from the merit order would be lower, hence defying NTPC’s rationale of investing in Chhabra’s operational improvement.

Chhabra plant currently operates at a high station heat rate, which means that it consumes more coal than other plants to generate electricity. NTPC’s main target was to lower the average station heat rate of the plant, sources said. “NTPC takes over Chhabra Thermal Power Plant of Rajasthan; will help to improve efficiency and lower tariff,” power minister Piyush Goyal had tweeted after the MoU was signed in January.

NTPC had signed an MoU with Rajasthan Rajya Vidyut Utpadan Nigam and Rajasthan Urja Vikas Nigam to take-over the Chhabra plant in January this year. NTPC was supposed to pay Rs 700 crore, and take over the plant’s debt of about Rs 3,200 crore.

NTPC Limited