The Uttar Pradesh Power Corporation (UPPCL) has got 18 power companies to supply 3,800 MW of electricity under 15-year contracts at a weighted average tariff of Rs 4.16 per unit, the cheapest since new bidding norms were put in place two years ago, report Deepa Jainani in Lucknow and Sumit Jha in New Delhi. The lowest tariffs discovered by UPPCL under competitive bidding was Rs 3.94 a unit, compared with Rs 4.29 by Kerala in 2014 and Rs 4.27 by Andhra Pradesh last year.

The tariffs fell as power firms, anxious to find long-term buyers for untied power capacity, put in aggressive bids. Removal of the 20% mandatory open-capacity (meant for merchant sales) clause from bidding criteria also helped companies quote lower tariffs.

The tariffs quoted were in a rather narrow range, resembling the results of reverse e-bidding process, though bids were in the conventional way where participants submit final offers in sealed envelopes.

“The rates reflect intense competition as power developers are desperate to find buyers in an environment where long-term PPAs (power purchase agreements) are hard to come by,” an industry source said.

He added that the state power company decided to amend open capacity clause after developers pushed for it. This led to mitigation of risk associated with the clause, which eventually helped in discovering lower tariffs. “The intensity of the competition can be gauged by the fact that while we had asked for 3,800 MW power across the three bid process, we received tenders worth almost 7,000 MW. With such wafer-thin margins, it would be interesting to watch out for who finally makes the cut,” said a UPPCL official.

According to the company’s

plans, the 3,800 MW power that would be procured from October 2016 would be shared among the distribution utilities.

The state had divided the entire power requirement into three parts based on fuel source. While power plants based on domestic coal linkage were vying for 2,800 MW of capacity, the remaining 1,000 MW was equally divided between those based on imported coal and captive coal mines. Another UPPCL official said: “We have not kept the bidding tightly compartmentalised. For example, if we get more than the required 2,800 MW from linkage power at cheaper rates, we will not cut it off at 2,800 MW merely because we have fulfilled the quota, but would go on to buy more power as available at the cheapest price, across all the three streams,” he said. He added that the power suppliers were not only competing with those who had qualified within the fuel stream but with competitors across streams.

While Jindal India Thermal emerged the frontrunner among the 12 companies that had placed the financial bids for the linkage coal tender, at R3.94 per unit for the 200 MW that it offered, it was closely followed by Jindal Power at second spot at R3.95 per unit for 325 MW. For captive coal mines, the lowest bid was that of Jaiprakash Power Ventures at R3.95 per unit for 450 MW, closely followed by GMR Chhattisgarh at R4.05 a unit for 500 MW. For imported coal, there was a tie between Adani Power and JSW Energy at R4.06 per unit. While Adani Power bid for 500 MW power, JSW Energy pitched for 262 MW. The financial bids would now be placed before the bid evaluation committee, which will evaluate the risk factors and decide on the final list.

Interestingly, UP has sought to procure power under competitive bidding twice now on the eve of state-level elections. Availability of power and issues related to law and order are hogging the limelight in the poll-bound state. Chief minister Akhilesh Yadav has announced that from October itself, the power supply schedule for rural areas has been increased from 10 hours to 14 hours, and the schedule for districts has been raised from 15 hours to 20 hours. Likewise, for divisional headquarters, the supply hour schedule has been increased from 18 hours to 22 hours and KAVAL towns (Kanpur, Allahabad, Varanasi, Agra and Lucknow) have been categorised to receive 24 hours of power supply. Earlier, only Lucknow and Agra had the privilege of getting round the clock power supply.