Private Power Players Cry Foul at Proposed Changes to Centre's Tariff Policy

The power ministry is considering exempting central utilities from mandatory bidding for power supply contracts.

New Delhi: Private power producers have opposed the proposed policy change to exempt central government generation utilities like NTPC and NHPC from bidding for electricity supply to power distribution companies (discoms), saying it could end up raising tariffs and hurt consumers if implemented.

Besides, they have argued, the policy proposal is discriminatory and could shrink business opportunities for the private sector.

A policy that makes it mandatory for private players to participate in bidding for electricity supply to discoms is in place since 2006. Despite their stated reluctance, central utilities were brought under the policy belatedly in 2011.

The union power ministry took that decision at the time based on advice from the Central Electricity Regulatory Commission (CERC), which found that average tariff for a sample of 14 NTPC power plants was significantly higher compared to private generating stations.

However, the power ministry has now proposed to exempt them from compliance with the bidding guidelines. If that happens, electricity supply from central utilities’ plants would be fixed through mutual negotiations between generators and discoms.

State government-owned generators are already exempt from compliance with bidding guidelines.

The policy proposal is part of the comprehensive overhaul of the Centre’s Tariff Policy 2006 being undertaken by the Centre.

In a letter to Union power minister R.K. Singh, Association of Power Producers (APP), a lobby group of private power generators like Reliance Power, Tata Power and Adani Power, has opposed the policy proposal, terming it as a regressive step.

Pointing out that efficiency of power plants set up by private players, cost of generation has come down in last eight to nine years, APP director general Ashok Khurana has said, “It is surprising to note that contrary to the advice of CERC, the ministry of power is again proposing to reintroduce this regressive provision of cost-plus regime for central sector generating stations.”

Recalling that in the run up to the mandatory implementation of tariff bidding in 2010, NTPC signed PPAs for supply of electricity from projects worth 38,000 MW through negotiation route to avoid facing competition.

Khurana has also argued that the proposal would take away the flexibility from discoms to “optimise their power procurement plans”, which would hit their finances.

According to industry sources, NTPC has not signed PPA for any competitively bid project.

Khurana has alleged that NTPC has started implementing projects under joint venture route with states to stay under the cost-plus regime.

“Presently, with sufficient generation capacity available, such exemption from competitive framework is neither needed nor desirable. It would act as an obstacle for the development of power market and different market products therein which can serve the diverse need of power by different consumer categories,” cautions the letter.