This has been done to create greater bargaining power for the centre in evaluating the project cost, sources said. Another consideration for the proposal would also be taken into account if the cost and power tariff are in line with the operating power plants here.

"We have a number of large thermal-power plants operated by the National Thermal Power Corporation (NTPC) and also independent-power producers which could be used as a benchmark to negotiate the cost of these projects," they said. A decision would be taken on a case-to-case basis.Germany, Japan and France proposed to set up large-capacity power projects in India to meet thegrowing shortfall in a short time-span.

As per the bilateral talks held earlier, while these projects could avail themselves of a low interest loan from banks and financial institutions, the centre was to help them obtain statutory clearances. The government would also provide land, water and other basic requirements for the project. One such project was to be implemented jointly by Asea Brown Boveri (ABB) and Siemens.

The government's recent decision is part of its plan to rectify the mistakes committed in power-sector reforms, said sources. "We would like to increase generation capacity, but there should also be contribution from the state electricity boards and other government agencies, which can be done only if they are provided a level-playing field," they added.

Apart from the competitive route or using the benchmark project cost, the ministry is also insisting that project developers invite tenders for engineering, procurement and construction (EPC) contracts. Tenders for EPC contracts not onlygive local players an opportunity to participate, but also put pressure on the contractor to reduce the cost. It is also important as the price of power-project equipment in the international market has slumped in the last two years, said sources. Under the prevailing trends, the EPC contractor shares equity in the project usually to the extent of its EPC cost. This provides a developer a comfort level with regard to the EPC commitment.