THIRUVANANTHAPURAM: The cabinet has decided to restore four long-term contracts to purchase large quantities of electricity from private companies. The Electricity Regulatory Commission will be directed to review the order cancelling these contracts after finding irregularities. The intervention is under Section 108 of the Central Electricity Act. This is in the background of facing power shortages and not getting enough water to the dams during the monsoons.

Considering the demand of KSEB, the committee chaired by the Chief Secretary had submitted a recommendation for this. However, it remains to be seen whether the Regulatory Commission will be ready to validate the contract which was found to be irregular and cancelled with cause. Although the government had given instructions in 2006 and 2017, it was related to tariff determination. The contracts to purchase a total of 465 MW per day from Jhabua Power Limited and Jindal India Thermal Power for 25 years were cancelled on May 10. The main irregularity was fixing different rates for the same company through two contracts at the same time.

The cabinet also considered the suggestion that the government should join the appeal filed by KSEB in the Central Appellate Tribunal against the commission's order. The board can withdraw the appeal if the government directs it to reconsider the decision. The third suggestion was to approach the Supreme Court to restore the contract. It was also dismissed as the case would drag on.

Government justification, lower price

1. Under the long-term contract, 350 MW unit was paid at Rs 4.29 per unit and 115 MW at Rs 4.15 per unit.
2. Tenders were called for short- and medium-term contracts in the absence of this, but other companies demanded Rs 6.88 to 7.10 per unit.
3. With the restoration of the contract, the power deficit will disappear.

If the commission does not relent, an appeal will be filed with the Central Regulatory Commission.

Legal entanglement

1. Sanctioning contracts where the government itself has ordered a vigilance probe for irregularities, may be illegal.
2. The Regulatory Commission had twice denied approval to the deal. The Central Appellate Tribunal had also refused to grant a stay of cancellation.
3. Only the central government has the power to fix tender and contract criteria. The state cannot correct or interfere with it.

Irregularity in contract

• Central norms were not met
• Two bids were invited instead of one
• 9623 crores liability to KSEB due to illegal rate adjustment

"Next steps will be taken after notification of Cabinet decision."

-State Electricity Regulatory Commission