No tariff-based bids for hydro, transmission projects

To give a boost to the power sector, the Union Cabinet on Thursday decided to exempt hydro and transmission sectors from the mandatory tariff based competitive bidding system till December 2015. Tariff based bidding has been mandatory since January this year with thermal power projects already being awarded on the process. Under this process, power projects are awarded on the basis of best tariff offered by competing companies.

In addition, it has also exempted intra-state transmission sector from the mandatory competitive bidding for another two years till January 5, 2013. The Cabinet also gave exemption to the experimental work for 1,200 KV HVDC line in the transmission sector from the realm of tariff-based competitive bidding. Such exemption will also be provided to state controlled or owned hydro projects. Till now, only private players were exempt from bidding for hydro power projects on a tariff-based system.

Earlier, under the Tariff Policy 2006, PSUs were allowed to adopt the cost-plus tariff structure and this permission expired in January after which they compete with the private firms for supplying electricity. Under the new hydro policy, projects were also allowed to sell as much as 40 per cent of their capacity under the merchant route in the market. But the Cabinet on Thursday also decided to give a level playing field to state owned power projects vis-a-vis private sector projects.

The decision to extend the deadline for tariff based bidding is expected to bring some cheer to the sector. Experts point out that it is very difficult to determine the time and cost of hydro projects as there are a lot of uncertainties during the project stage, making it complicated to arrive at a tariff.

Power sector regulator CERC had advised the government that the deadline of January 2011 for completing the transition to procurement of power through tariff based competitive bidding should not be extended any further. It, however, had also asked the ministry to relax the deadline in exceptional cases such as for large size multipurpose storage hydro projects in view of the complexities and construction risks involved.

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