The draft tariff policy circulated by the government seeks to exempt power plants of all central public sector units or CPSUs from mandatory tariff-based competitive bidding.
June 1, 2018
NTPC’s new power plants may not have to compete with private companies if the latest government proposal goes through. The draft tariff policy circulated by the government seeks to exempt power plants of all central public sector units or CPSUs from mandatory tariff-based competitive bidding, a move that took the industry by surprise.
Private power companies have been holding NTPC responsible for the stress in the sector and recently alleged bias toward PSUs by the government in handing over excess coal and transmission contracts. The lack of power purchase agreement or PPA opportunities by states is cited as one of the key reasons for stress in the sector.
The industry has hailed most other amendments proposed in the tariff policy. “This is the only regressive move in the entire draft tariff policy whose objectives are mentioned as making power available at competitive rates and ensuring financial viability of the sector. It is an established fact that cost-plus tariff is higher than tariff discovered through competitive bidding,” said an industry observer, who did not wish to be identified.
The draft policy said: “All future requirement of power should continue to be procured competitively by distribution licensees except in cases of expansion of existing projects or where there is a company owned or controlled by the state government or central government as an identified developer where regulators will need to resort to tariff determination based on norms provided….”
NTPC had signed PPAs with states for more than 40,000-mw capacity days before the mandatory competitive bidding power procurement came into force. Lenders and developers of an equal number of private power plants are grappling with stress.
