prime minister Manmohan Singh may have cleared two new ultra-mega power plants (UMPPs) of 4,000 MW each in Orissa and Tamil Nadu, but more than getting the land and other clearances, the bigger hurdle will be in getting the government to clear the bid document. The document, called Case 2 in power jargon, was first cleared by Veerappa Moily last September when he was power minister, but it was reopened and several changes made ?the EGoM that needs to clear it has yet to meet.
The last power purchase agreement (PPA) that involves what are called Case 1 bid documents, was signed more than two-and-a-half years ago. Once again, the bid document approved by Moily has been re-opened and the inter-ministerial group will decide on this on July 19.
The reason why Case 1 and Case 2 bids are important is that, under the bid documents, the producer has to take all the fuel risk; so, when prices of Indonesian coal rose dramatically, the UMPPs using it became unviable and the Central Electricity Regulatory Commission had to find a way to allow them to pass through the costs. This has still not been approved three months later. The new Case 1 and Case 2 bid documents, by contrast, allow fuel costs to be passed on ? Case 2 applies to UMPP-type plants where land and coal mines are provided by the government, Case 1 to those where these are not provided.
In the absence of these documents, while states have been inviting bids for PPAs, nervous power producers are quoting exorbitant prices ? R5-6 per unit of power ? just in case fuel prices rise. Had there been a Case 1 bidding document where power tariffs would rise only if fuel costs rose, chances are the tariffs quoted would be much lower.