Editorial: Want electricity, can’t bid

Aug 08 2013, 01:58 IST
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SummaryBid documents for power projects continue to hang fire

When power minister Jyotiraditya Scindia informs Parliament that private sector investment in the power sector has fallen 44% in FY13—to R54,953 crore from R98,283 crore in FY12—the reason is not just to do with the crippling shortage in coal and the government’s inability to push through the proposal to get in private sector mining. It has to do with the state/central governments not pushing for greater competition through implementing open access-based competition in the sector and, believe it or not, the absence of bidding documents. Thanks to confused policy-making in the past, India had moved to bidding for projects where private players were expected to take on the risk of fuel prices not rising for 20-25 years—this is why so many of the ultra-mega power projects are in various stages of litigation. When prices of fuels started rising, the once-bitten-twice-shy power producers started bidding absurdly high tariffs when electricity bids were called for, ensuring that no new power projects have been signed up in the last two years.

Which is why the government then began working on a new set of bidding rules and bid documents which had two main purposes. First, to put the fuel risk where it originally belonged, on the buyers of electricity. Second, to ensure that if the project never got completed for some reason, the project could quickly be taken back and re-bid to another buyer. This is what the empowered group of ministers will be debating later today. While the power ministry has proposed some changes in the draft documents that have been prepared by the Planning Commission, while coming to a decision, the EGoM needs to keep in mind the twin objectives behind the new process, to allow proper sharing of risk and to ensure that, were a project to not get completed for whatever reason—critical in a situation where leading suppliers are cash-strapped and over-leveraged—it should be possible for the government to take back the project. With the Prime Minister himself pushing for the speedy bidding for two new ultra mega power projects in Tamil Nadu and in Orissa, not clearing the new bidding norms will only mean further delays.

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