a)                  Exploitation of the hydel potential is on the priority agenda of the Govt. of Himachal Pradesh and in pursuance of the policy       incentives notified by the GoHP from time to time, the Board is required to purchase the power offered by the developers in respect of  this project of the capacity of 16 MW at a fixed rate of Rs.2.25 per kwh, as per the MOU signed by the IPP with the Govt.  on 21.6.2000. 

b)                 The availability of power from the Project shall go a long way in meeting the long term power requirements of the State.  The Board faces shortage of power during winter months which is likely to aggravate further unless suitable power generating capacity is added to the system in a time bound manner.  The power requirements of the State during summer months are also expected to increase with the growing industrialization etc. and the existing summer surpluses are likely to taper down in future years.  The process of banking the summer surplus energy with the adjoining state to facilitate flattening the power availability curve during various months of the year has already been initiated and in times to come the scope of the same has to be widened and in order to achieve the objective, summer surpluses have to be increased, which is possible only if capacity addition in the system takes place continuously. 

c)                  Electricity generated at the project shall by and large be consumed locally which shall mean availability of quality power to the consumers.  Besides, the localized installation of generating station shall also add to the reliability of power to the consumers. 

d)                 The Project by virtue of its being less capital intensive with shorter gestation period, is attractive with IPP being keen to go ahead with its execution.  The execution of this Project has been pending for quite some time for want of the Power Purchase Agreement.  The Power Purchase Agreement is an important ingredient of the process and for smooth and economical execution of the Project, the flow of funds in a time bound manner is a must, which amongst others is facilitated by the Power Purchase Agreement.  The necessity for obtaining approval of the Power Purchase Agreement, therefore, also arises for ensuing the cost effective implementation of the project. 

11            HEADS OF AGREEMENT 

            The principal heads of Agreement are discussed in the Power Purchase Agreement (Annexure-A) as per details given below: 

a)                  Definitions and interpretations: Incorporated in Article-2 of the Power Purchase Agreement. 

b)                 The Power Purchase Agreement shall become effective from the date  of signing by the parties after the approval is accorded to it by the Honble Commission and Section 10.1 further elaborates the period upto which the Power Purchase Agreement shall remain effective.  The Power Purchase Agreement spells out various terms and conditions governing the stipulated activities in relevant articles.