Why has there been no recourse to a Call for Proposals or Expression of Interests for trash energy?

Extension of Power Purchase Agreement with Alteo

By Pawan Kumar

The leakage to the press of the famous CEB letter, dated 19 February 2019, to Alteo confirming, inter alia, that ‘Trash energy will be remunerated at Rs 4.45/KWh and fixed during the 3-year extension’, has given rise to many questions.

The Minister responsible for the subject matter has, so far, systematically refused to provide information regarding the deal pretending that negotiations are still on and that the matter has yet to be referred to Cabinet for a decision, though, from the above-quoted letter it is clear that a decision has already been reached on trash energy and communicated to Alteo.

Serious doubts have been raised regarding the manner in which the whole affair has been handled. For the sake of transparency, and to dissipate all suspicions of any under-dealings, government should, in the interest of sugarcane growers and consumers in general, shed light on the following:

  1. How has the rate of Rs 4.45/KWh for trash energy been arrived at? What have been the yardsticks used?
  2. Is it true that the rate initially agreed upon was Rs 3.09/KWh and, following the meeting held with representatives of CEB and Alteo at the Ministry of Public Utilities on 18 February 2019, the rate was increased to Rs 4.45/KWh? Why this increase of Rs 1.36?
  3. What has been the role of the Negotiating Panel provided for in Power Purchase Agreements (PPA)?
  4. Why negotiate with only one Independent Power Producer for the trash energy? Why has there been no recourse to a Call for proposals or Expression of Interests for trash energy?
  5. Is it legally in order to include trash energy – which is a completely new element – at the time of renewal of the Power Purchase Agreement (PPA) with Alteo? Has the Ministry sought the views of the Procurement Policy Office or the Solicitor General on the matter? If yes, what has been the advice tendered?

Many who have been following the debates on the matter both at the level of the National Assembly and in the media, are of the view that trash energy is something new with wide implications for sugarcane growers and consumers in general, and would constitute a major alteration to the existing PPA. Accordingly, it should be subject to a separate Agreement following a proper tender exercise in accordance with the provisions of the Public Procurement Act, especially in the light of the recent Supreme Court judgment in the case STC vs Betamax.

A call for Proposals/Expression of Interests as per provisions of the Public Procurement Act would ensure the much required transparency in the allocation of the contract and also enable the CEB to obtain the best deal.

The management of the CEB and the government officials directly concerned should exercise great caution before signing the new PPA with Alteo, as there is a high risk that it may be proved to be illegal with the inclusion of trash energy. Ministers come and go. Finally it is the management who will be held answerable for irregularities, if any, in the extension of the PPA.

On the other hand, as we are given to understand that negotiations are still on with Alteo Energy Ltd, Government should seize the opportunity to renegotiate the contract and ensure that small sugarcane planters do get their fair share in the deal, the more so, since the Minister of Agriculture, in reply to a PNQ on 18 June last, conceded that ‘bagasse is not being fairly recognised in the production of energy out of sugarcane’, and that ‘in new contracts we have to consider the economic value of bagasse in the production of energy so that growers are fairly remunerated for the bagasse they are supplying to the IPPs.

Let’s hope the Minister of Agriculture will keep his word and will not let go the opportunity to renegotiate the contract with Alteo Energy Ltd.


* Published in print edition on 28 June 2019

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