Power Finance Corporation (PFC) has been mandated to be a consultant for all states for long- and medium-term power procurement. The decision comes with the power ministry finalising model bidding, aimed at bringing greater transparency to purchase agreements.
Prime minister Manmohan Singh had suggested model bidding to prevent financial irregularities in the government.
Under model bidding, all case-1 operators setting up plants on the design-build-finance-operate-transfer (DBFOT) basis and case-2 operators setting up plants on the design-build-finance-own-operate (DBFOP) basis will have to bid according to the guidelines of the model bidding document.
A power ministry official told fe that the model bidding document had to be adopted by all procurers, and that PFC as a consultant would ensure that the guidelines are followed.
The model bidding document has been notified under section 63 of the Electricity Act of 2003, and is enforceable by law.
According to power secretary PK Sinha, the document would bring greater transparency to power purchase agreements and help minimise disputes as the guidelines block opportunities for favouritism. The power procured or sold on the basis of any other document could attract litigation, a power ministry official added.
Many purchase agreements become invalid after they are challenged in court, which, in turn, creates obstacles in project development. Generally, power projects can?t get coal linkages without a valid purchase agreement, which slows down capacity addition.
The model bidding document has been prepared in consultation with the Central Electricity Authority (CEA), NTPC and other stakeholders in the power sector. ?But there are complications that utilities might face in implementing the model,? Sinha said.
PFC, as a government-run financial institution, would be able to oversee compliance issues as it has developed bidding competence for implementing ultra mega power projects.