The Hindu Business Line : Competitive tariffs in power generation mooted

Competitive bidding system for selecting developers and to promote public private partnership in transmission projects may lead to reduction in transmission charges.

New Delhi April 4 The Working Group on Power for the 11th Plan has suggested competitive tariff structure in generation through promotion of ultra mega power projects and merchant power plants (MPPs) and upgradation of the generation technology to a larger number of super-critical systems.

In its main report composed of nine sub-groups to go into specific areas to cover widely the terms of reference, the Group headed by the former Power Secretary, Mr R.V. Shahi, said that for the 11th Plan which begins on April 1, 2007, the capacity projected is 68,869 MW consisting of 15,585 MW (hydro), 50,124 MW (total thermal- coal, lignite, gas; LNG) and 3,160 MW (nuclear).

Over and above this, non-conventional energy sources are likely to contribute to capacity addition of 13,500 MW.

However, in the main report, the Member Secretary of the Working Group and Member (Planning) Central Electricity Authority (CEA), Mr V.S. Verma, said that the entire report is predicated on the 10th Plan likely capacity addition of 30,641 MW corresponding to which the 11th Plan capacity addition is likely at 68,869 MW and 12th Plan capacity addition of 82,000 MW.

Following the finalisation of the Report, the CEA had reviewed the likely capacity addition during the 10th Plan, which is now to be around 23,250 MW.

Hence, he said, "the balance 10th Plan capacity would slip to the 11th Plan in addition to 68,869 MW planned for 11th Plan".

A salient feature of the 11th Plan preparation is that only such projects are being taken into consideration that have almost 100 per cent certainty for getting commissioned after allowing for necessary time in the cycle of project management for sanctions, clearances, tenders, commencement of work and plausible construction schedule.

Transmission

The report lays emphasis on transmission and said the transmission system planning is undergoing, both quantitative and qualitative changes. Hybrid system of HVDC and DC, upgradation to 765 kV to larger extent, is being planned.

It said that care should be taken to ensure that there is sufficient scope for providing open access in transmission to allow for trading of power at much higher scale, to allow forMPPs to access the grid and transact their business and also to allow for required redundancies for unforeseen outages without affecting reliability.

It said the size of MPPs could be up to 1,000 MW which might be apt considering greater possibility of financial closure without long-term power purchase agreements for comparatively smaller-sized projects and also of making available transmission corridors for such MPPS. A target capacity of about 10,000-12,000 MW during the 11th Plan through MPPs could be feasible.

Bidding system

It said competitive bidding system for selecting developers and to promote public private partnership in a number of transmission projects is likely to pan out positive advantages in terms of reduction in transmission charges.

Inter-regional transmission capacity is planned to be stepped up from 16,500 MW (end of 10th Plan) to 37,000 MW by 2011-12.

In order to promote open access and power trading, a National Transmission Tariff Framework for Tariff Policy, as is currently under way by the Central Electricity Regulatory Commission (CERC), is a pre-requisite.

APDRP programme

On the distribution front, thrust is to persist with a bigger scale, the Accelerated Power Development and Reforms Programme (APDRP) for towns.

Based on the feedback from States and recommendations of the Abraham Committee and also in consultation with the Plan panel and the Finance Ministry, the APDRP programme is required to be restructured with major thrust on milestones- based assistance an fillip, the report said. The fund requirements for the 11th Plan corresponding to the programmes projected in generation, transmission and distribution is Rs 9 lakh crore.

It should be possible to arrange the fund provided the companies in the Central sector, in the State sector and also in the private sector access the capital market not only for debt funding but also for equity funding through instruments such as IPO.