Kerala ignores electric board plea to stop costly power

Published Oct 21, 2015, 10:58 am IST
Updated Mar 27, 2019, 10:02 am IST
The original 15-year PPA with BSES concludes on October 27
Representational image
 Representational image

THIRUVANANTHAPURAM: For nearly 15 years, Kerala has been paying Reliance-owned BSES Rs 12.32 for every unit of power purchased, markedly higher than open market rates under a contractual obligation. KSEBL now says it is time end this ‘farce’ but the State Government strangely says, ‘No’.

The State Government has taken a political decision to extend the power purchase agreement with BSES power plant of Anil Ambani’s Reliance Energy Limited. Since no unit of power has been sourced from BSES for the past three years, the move to extend the PPA by paying a fixed cost imposes unnecessary financial burden on a cash-strapped KSEBL.


The original 15-year PPA with BSES concludes on October 27. Though the political leadership wanted the contract extended for another 10 years, stiff opposition from KSEBL officials has limited the extended contract period to two years.

KSEBL opposed the extension on two grounds. One, it has not been evacuating power from BSES for the last three years; even earlier, it was only occasionally that BSES power was sourced.

Two, BSES power is highly costly; while power is available in the open market at an average of Rs 3-4 per unit, BSES charges a whopping Rs 12.32 per unit.

The recent long-term power purchase arrangements struck by KSEBL with private traders are for less than Rs 3.

“At a time when there is a profusion of private players, it would make no business sense to stick to BSES,” a top KSEB official said.  

The arrangement is a win-win one for BSES. The state might not have sourced even a single unit of power from the company but BSES had still gained considerably.

KSEBL had been paying a fixed cost of over Rs 80 crore yearly irrespective of whether the state had taken power from the company or not.

“BSES might have extracted over Rs 1,000 crore as fixed cost alone from the state,” the official said.

Intriguingly, even the new terms are skewed in favour of Reliance. BSES wants the KSEBL to foot the entire Rs 130 crore required to make the transition from naphtha to LNG.

What’s more, BSES is not even willing to halve the fixed cost. “This is absurd. It is their need, not ours,” the official said.  

Location: Kerala