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A file photo of a power plant. Photo: AFP (AFP)
A file photo of a power plant. Photo: AFP

Bid norms for new projects by this month

Govt to specify that these be transferred to electricity buyers at end of 25-year power purchase agreements

New Delhi: The government will this month finalize the bid documents for all new power projects, including those capable of generating 4,000 megawatts (MW), in which it will specify that these be transferred to the electricity buyers at the end of the 25-year power purchase agreements (PPAs).

These pacts are signed between the project developers and the state governments. Currently, it isn’t clear what’s supposed to happen to these showpiece power projects after the PPA runs out.

In addition, these standard bid documents (SBDs) will also specify the appointment of independent engineers for some projects, which is being regarded by critics as the return of inspector raj, or overbearing official oversight, which may create confusion by duplicating the functions of the regulator.

The changes are being seen as a bid to stave off criticism following a report by the Comptroller and Auditor General (CAG) of India targeting irregularities regarding the ultra mega power projects (UMPPs), as the 4,000MW projects are known. The move has seen opposition from various quarters such as the Central Electricity Regulatory Commission (CERC), India’s apex power sector regulator.

“For new projects, we have decided to shift to DBFOT (design, build, finance, operate and transfer) model from the BOO (build, own, operate) model," said a top power ministry official requesting anonymity. “SBDs will reflect this and will be finalized by December."

The independent engineers will be sought to be appointed in the case of the so-called Case 2 projects, where resources such as land, fuel and water are identified and, in some situations, also provided to the developer quoting the lowest power tariff, such as the UMPPs.

“Though there has been opposition to some of the provisions such as the appointment of engineers, who have been termed as inspectors, this provision will be there," the power ministry official added.

Another power ministry official requesting anonymity said SBD for Case 2 bidding will be finalized by December. Mint reported 4 September about the proposed move.

Pramod Deo, chairperson of CERC, has expressed reservations about some SBD provisions. “In our view, DBFOT model is suited more for natural monopoly businesses like road, transport, transmission and distribution of electricity, etc., and not for delicenced businesses like generation," he wrote in a 26 October statutory advice to the power ministry posted on the CERC’s website. “It is felt that DBFOT model may not inspire the developer to adopt prudent maintenance towards the end of concession period leading to high degree of deterioration of the plant."

He also drew attention to issues such as “complexities in transfer process" and “uncertainties in terms of financing" and recommended the BOO model.

In addition, Deo wrote, “In the draft model PPA, the concept of an independent engineer has been introduced at various stages of the project.

The provision of appointment of an independent engineer by the ‘utility’ and with such elaborate roles and functions of overseeing/certifying inter alia technical parameters of the plant, would tantamount to creating an independent authority not envisaged under the Electricity Act, 2003. This may also lead to dispute and ideally be dispensed with."

The Indian Express newspaper reported on 19 October “that the new bidding documents could usher in an ‘inspector raj’ through the backdoor."

Deo said, “We have given the power ministry the commission’s view. The government is free to do what they want to do."

The spokespersons for Tata Power Co. Ltd and Reliance Power Ltd (R-Power), both of which are setting up UMPPs, declined to comment.

India intends to build at least 16 such UMPPs as part of its strategy to add large capacities at one location. Of the four such plants that are underway, R-Power was the successful bidder for coal pit head projects at Sasan in Madhya Pradesh and Tilaiya in Jharkhand, and the imported coal-based project at Krishnapatnam in Andhra Pradesh. Tata Power won the imported coal-based project at Mundra in Gujarat.

The new SBDs will cover these UMPPs that are being set up.

The power ministry had set up a panel to review the standard bid documents of all proposed Case 1 and Case 2 power plants in the country to mitigate the risks taken by developers. In Case 1, the quantity and time of power procurement is identified, but fuel type, sources and the location of the plant are not specified.

R-Power has sued HT Media Ltd, publisher of Mint, in the Bombay high court over a 12 May 2010 front-page story in Mint that it disputed. HT Media is contesting the case.

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