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Independent Power Project (IPP)

An IPP is a stand-alone power generation unit structured as a unique legal and financial entity. IPPs originated in India in the early 1990s when the central government liberalized the power sector and allowed private players to enter power generation. However, the IPP movement in India has not been successful, with very little of the planned capacity actually built and existing IPPs defaulting on debt, as their customer state electricity boards could not afford the costly power due to being loss-making themselves.

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32 views1 page

Independent Power Project (IPP)

An IPP is a stand-alone power generation unit structured as a unique legal and financial entity. IPPs originated in India in the early 1990s when the central government liberalized the power sector and allowed private players to enter power generation. However, the IPP movement in India has not been successful, with very little of the planned capacity actually built and existing IPPs defaulting on debt, as their customer state electricity boards could not afford the costly power due to being loss-making themselves.

Uploaded by

analyst_anil14
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Independent Power Project (IPP)

An IPP is essentially a stand alone power generation unit structured as a unique legal and
financial entity. An IPP is thus a one project entity (need not be a separate company from
its promoting company(s), but often is).
What is the origin of this concept?
IPPs came around when governments around the world tried to induce the private sector,
often foreign companies, to invest in generation. The government has dominated power
sector in most countries. A special mechanism had to be created to allow for a role for the
private sector. Governments came up with special schemes for projects. Such schemes
also meant that specific projects had to be kept separate.
What is the history of IPPs in India?
IPPs originated in India in early 90s when the central government liberalized the power
sector and allowed new private players to come in. The policy, enunciated in 1991,
created this concept of IPP in India for the first time. The government asked for private
players to come into power generation and created for them a set of rules and guidelines.
However, the IPP movement in India has not been successful. Very little of the planned
capacity actually came in, and of what came in, all of them are defaulting on debt at the
moment. No new IPPs are coming at the moment.
Why have IPPs failed in India?
IPPs have failed largely because their customer State Electricity Boards (SEBs)
couldnt afford to pay for their power. All SEBs in India are loss making. IPP power
turned out to be costly as well since the government guarantees return to IPPs and
hence, the SEBs found that did not have the cash flow to pay IPPs. A celebrated example
is the tangle between Maharashtras SEB and Enrons Dabhol Power Company.
Maharashtra government, after a few months of buying the power, simply declined to pay
as the losses of MSEB were mounting.

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