KSEB under fire for paying Rs 100 crore to non-operational NTPC plant

THIRUVANANTHAPURAM: Allegations have been raised against the Kerala State Electricity Board (KSEB) over an unreasonable agreement to purchase power from the NTPC thermal plant at Kayamkulam, which has not been producing electricity for the past nine years. According to the allegations, KSEB is paying for electricity that is not being generated. The financial burden of this agreement may ultimately fall on consumers through increased power tariffs.

It is also alleged that approval for the agreement was obtained by misleading the state cabinet. Under the deal, KSEB has agreed to pay NTPC a fixed amount of Rs 100 crore even if no electricity is purchased. The state government recently approved the extension of this agreement for another three years.

NTPC supplies electricity to Kerala from its Talcher plant in Visakhapatnam through the central power pool. Kerala receives its allocated share from this pool, and payments are made to the central pool authorities, who in turn pay NTPC.

Critics claim that KSEB and the state government have agreed to this contract under pressure from NTPC to ensure uninterrupted supply from Talcher. They argue that if supply from Talcher is disrupted, it is the responsibility of the central government to arrange an alternative, not to force Kerala into paying for power from a non-operational plant.

KSEB’s audit wing had reportedly pointed out that cancelling the agreement could save Rs 1.38 crore annually. However, the recommendation was ignored, and the government extended support to the deal, critics allege.

Contract extended five times
The state government had invited NTPC to set up the Kayamkulam plant in 1995 during a period of power shortage. The plant began operations in 1999, with an agreement to purchase electricity for 12 years.

However, the cost of electricity from the plant rose sharply due to the high price of naphtha fuel, reaching Rs 14 per unit. In comparison, hydel power costs around Rs 1.50 per unit, nuclear power around Rs 5, and power purchased from outside contracts around Rs 8 per unit. The Centre has also fixed a maximum rate of Rs 12 per unit for open market purchases.

Due to the high cost, KSEB stopped buying power from the Kayamkulam plant, which ceased operations in 2017. Despite this, KSEB extended the agreement five times. Under the earlier terms, it had to pay around Rs 200 crore per year as fixed charges, even without purchasing electricity.

In 2022, when the contract was renewed, the fixed charge was reduced to Rs 100 crore. Over 25 years, KSEB has reportedly paid Rs 4,692 crore to NTPC.

Strategy to protect NTPC assets
It is alleged that if the agreement is terminated, NTPC would have to return the 999 acres of land provided free of cost by the state government, along with the plant. This could impact NTPC’s assets and share value. Critics claim that this is the reason behind efforts to continue the agreement.