Inner banner

Tariff-based bidding: Hydro, inter-State transmission projects get a breather

The Centre has amended the Tariff Policy to exempt all hydro power projects and inter-State transmission projects from the mandatory tariff based competitive bidding, which came into effect from January 6 this year. Hydro power majors such as state-owned NHPC Ltd and Satluj Jal Vidyut Nigam (SJVNL), along with transmission utility Power Grid Corporation of India Ltd are among those likely to benefit from the move.

Under the tariff-based competitive bidding norms, developers quoting the lowest average electricity tariffs from a proposed project get to set it up, as against the erstwhile “cost-plus” model, where projects were set up through pacts with distribution utilities and were entitled to assured returns. The deferment for hydro sector projects is based on recommendation of a Power Ministry taskforce, which cited high risks and uncertainties inherent to these projects as among the reasons why it is difficult for hydro projects to compete with thermal generation on long-term basis.

To incorporate the changes, the Cabinet approved suitable amendments in the existing clauses 5.1 and 7.1 of the Tariff Policy, 2006. Apart from an exemption to the all hydro electric projects from the mandatory competitive bidding till December 31, 2015, it cleared an exemption to the intra-state transmission sector from the mandatory competitive bidding for two years — up to January 5, 2013.

Apart from this, exemption of “experimental works for 1200 KV HVDC line” in the transmission sector and the “works required in a compressed time schedule” by the Central or State transmission utilities have been accorded on a case-to-case basis. The Clause 5.1 of the Tariff Policy provided that from January 2011 onwards, all future procurement of power by distribution utilities had to be mandatorily done through tariff-based competitive bidding.

The shift to the new regime was done after the CERC carried out an internal preliminary exercise for comparing the tariffs obtained through competitive route and those being allowed under the current cost-plus tariff structure, which indicated that the tariffs obtained through bidding were lower than the levelised tariff under the current cost-plus regime.