Tariff-Based Competitive Bidding

References have been received from various companies regarding challenges faced by the power projects due to increase in fuel prices. In a written reply to a question in Lok Sabha today, Minister of State for Power Shri K.C.Venugopal said that the Association of Power Producers has requested the Ministry of Power for modifying the existing contract and constituting an Expert Committee to resolve the issue in the interest of stakeholders. He said the existing contracts signed between the procurees, which are mostly state utilities and the developer of power projects are to be governed by the relevant provisions of the said contracts.

The Minister said that the Central Electricity Regulatory Commission (CERC) had advised the Government that the deadline of January, 2011 for completing the transition to procurement of power through tariff based competitive bidding should not be extended further except in cases of large size multi-purpose storage hydro projects and peaking stations. He added that the Government of India vide Resolution dated 08.07.2011 amended Tariff Policy 2006 and exempted all Hydro power projects from tariff based bidding for further period of 5 years on fulfilling certain conditions. He said specific transmission projects have also been exempted from tariff based bidding.

Shri K.C.Venugopal said CERC had undertaken a detailed exercise covering 14 projects to verify the findings that the tariffs being discovered through competitive bidding are lower than the cost plus tariffs. He said the study has concluded that the computed prices under cost plus methodology are higher than the levelized tariffs discovered under competitive bidding in respect of 12 out of 14 projects. He said all states have been advised to take necessary steps to switch over to the competitive bidding.