Government to move away from long-term PPAs

The central government is redrafting its model power purchase agreements (PPAs) to move away from long term contracts which are no longer suitable for the Indian power sector.

Power procurement costs are expected to be brought down through a mix of contracts of different tenures. Medium- and short-term contracts are most suitable as the country is planning to deepen its electricity market. The Ministry of Power (MoP) has constituted a committee with representatives from MoP, Ministry of New and Renewable Energy (MNRE), state discoms and the Central Electricity Authority (CEA) to look into the changes in tenure of PPAs, payment security mechanism, force majeure clause, and contracts reneging issues.