The expert committee constituted to review the bidding norms for ultra mega power projects (UMPPs) has submitted the first part of the three-part report to the power ministry, with recommendation for changes to be made.
The government had tasked the committee to suggest modification in the standard bidding document, following the withdrawal of all the qualified private developers from the final round of the bidding process of the proposed 4,000 MW UMPPs in Tamil Nadu and Odisha projects, which had cited difficulty in securing bank finance due to flaws in the bidding norms.
The first tranche of the report dealing with UMPPs based on captive coal mines was submitted to the ministry earlier this month. The other two reports would deal with UMPPs based on imported coal, and Case II plants other than UMPPs, respectively.
Under Case II, the government assumes the risks of land acquisition, clearances, fuel and other power plant requirement through a special purpose vehicle (SPV), before transferring it to the designated developer. Risk mitigation for developers allows the tariffs to be kept low.
“The committee has submitted the most important part of the report and will likely furnish the other two reports in the first week of next month,” Pramod Deo, former chairman of the Central Electricity Regulatory Authority (CERC), told FE. However, Deo refused to divulge the details of the final first report.
As per the industry sources, who have made representation before the committee, the recommendations are likely to junk the design-build-finance-operate-transfer (DBFOT) model incorporated in the new bidding criteria in 2013 and reintroduce build-own-operate (BOO) model. Investors as well as banks have found these impractical.
As per DBFOT norms, a developer would have to hand over the plant to the respective state government 25 years after winning the award.
It is precisely this clause that did in the two UMPPs, as bankers turned averse to lending to these projects, due to the lack of ownership rights with the developers.