Indian Railways (IR) expects to save nearly Rs 2,500 crore annually during the next three years as it plans to procure 1,060 MW of power through the competitive bidding route for the first time, a move that will do away with the established practice of procuring power from state-owned distribution companies.
The national transporter consumed nearly 17.5 billion units of electricity last fiscal at an average cost of Rs 7 per unit.
However, it hopes to realise a much lower rate of nearly R5 per unit from the bidding process for about one-third of its requirement of 6 billion units.
“The Central Electrical Authority had advised us to procure energy in a phased manner, hence we have initiated the process; we are aiming at reducing our energy cost in a big way through competitive bidding,” a source in Railway Energy Management Company (REMCL) said. He added that this process could lead to a reduction of 20% in the energy bill which stood at R12,500 crore in FY15.
According to the notice issued, the national transporter is looking to procure 440 MW for the western region, 350 MW for the eastern region, 220 MW for the northern region and 50 MW for the north-central region. It has opted to go for three-year power purchase agreements (PPAs) as it looks to test the market before delving into long-term PPAs in the future.
“The procurement for three years not only provides us with a testing ground as we are floating tenders for competitive bidding for the first time but in our analysis, medium-term procurement is ideal for low-cost power as it eliminates some of the risk and uncertainty involved in fuel price for the in the long run,” the source quoted above said.
The exercise, however, is likely to face stiff resistance from the states which do not want to lose a high revenue-generating client. An industry source said that NTPC had tried to enter into an agreement with the railways to supply power a few years ago but the thermal power producer had to abandon its plans due to objections raised by the states.
Besides going for competitive bidding, the railways has also started investing in captive power plants, the first of which in Nabinagar, Bihar will be commissioned in the first half of 2016. The coal-based power plant will initially produce 250 MW and will be ramped up to produce 1,000 MW on completion. The cost of the the power plant is pegged at approximately R5,350 crore and 90% of the electricity produced will be consumed by IR through an interstate transmission system. According to the policy decided by the ministry of power, it is mandatory for the IR to have a minimum 26% stake in the captive power plant and it is mandated to procure more than 51% of the power produced.
“We are also looking at setting up a captive power plant in Adra, West Bengal which will have a capacity of 1,320 MW but we will only go for it after a coal linkage is setup for the project,” the source said.
The technical bid for a 50-MW tender has been finalised and the financial bid is set to open on September 7 this year.
As for the 1,010-MW tender, the railways has postponed the technical bid from August 27 to September 18 this fiscal year.