The Hindu Business Line : Pvt players line up power projects of over 25,000 MW

New Delhi, June 4 A bevy of private power promoters are waiting in the wings with firm proposals to set up more than 30 greenfield power projects with a collective generating capacity of well over 25,000 MW across the country.

This interest among private players is reminiscent of the IPP (independent power producers) rush of the early nineties.

Spurred by the liberalisation of generation and bidding guidelines notified by the Centre, most of the IPPs are primarily eyeing coastal regions of Tamil Nadu, Karnataka, Andhra Pradesh and Orissa, which are close to industrial hubs. States such as Jharkhand, Chhattisgarh, Sikkim, Uttarakhand and Himachal Pradesh are also being targeted by developers.

While the private players, in most cases, have already identified land for the projects and have initiated the groundwork, the issue of States dithering on getting their act together for power purchase from the market on competitive bidding basis, however, is a grey area. Besides, the development of transmission corridors for evacuation of power from these projects, as and when they come up, is another thorny issue.

According to an executive with a private developer, the viability of the projects is dependent on States opening up their markets.

“The States and their distribution companies, which are mostly government-owned, continue to dither from switching to the market route for procurement of power, which is their statutory obligation under the Electricity Act 2003.” This is primarily due to States fearing that a lot of their paying customers would shift to the private sources.

Enabling framework

According to a Power Ministry official, the Centre has set the ball rolling on facilitating the private players to come in.

“We have got the enabling framework in place and its for the States to follow suit. This time the IPPs are Indian, unlike in the 1990s. They are ready to compete and they are investing upfront,” an official said.

Under the Tariff Policy of the Central Government issued in 2006 it has been mandated that all future procurement by the distributing licensees would be through competitive bidding route.

It is further mandated that after 2011 even the public sector generating companies should also get into the market through the competitive bidding route rather than the current cost-plus tariff mechanism.

While the standard competitive document for site-specific bidding for procurement of power was issued by the Ministry of Power in 2006, the standard bidding document for general procurement under long-term and medium-term contracts was finalised and notified by the Government recently in March 2009.

Though most of the new private projects are betting on tiding over financial closure uncertainties through competitive levelised tariffs in a scenario where industry is buying power at over Rs 10/unit to tide over shortages, questions still remain over whether States would facilitate power procurement through the market route by implementation of open access.

Open access allows large users of power to choose their electricity supplier, a move expected to bring in greater competition in the sector and enhance efficiencies in power supply for consumers.

The Electricity Act of 2003 had assigned the deadline of January 2009 for grant of open access to all consumers with electricity requirements of above 1 MW.