The Association of Power Producers (APP) has requested the Power Minister Piyush Goyal to review the current bidding model of the 4,000-MW each Ultra Mega Power Projects in Tamil Nadu and Odisha respectively, as industry says the mechanism is unviable.

APP in a letter to Goyal has said that the Ministry should undertake a comprehensive review of the Design, Build, Finance, Operate, and Transfer model of bidding adopted for these projects after power companies raised concerns on it.

The Association claimed that six out of the nine pre-qualified bidders for the Tamil Nadu’s UMPP had written to them that in its current DBFOT form, further participation in the bidding process would not be possible as financing of such projects is difficult and there are complexities in the transfer process.

These six bidders are Adani Power, CLP India, Jindal Steel and Power Ltd, JSW Energy, Sterlite and Tata Power. To further substantiate its views, APP also highlighted the Central Electricity Regulatory Commission’s (CERC) views on the DBFOT mechanism which states that the model is more suited for natural monopoly businesses such as road, transport, transmission and distribution but not for de-licensed businesses like power generation.

The APP added that CERC had drawn attention to the complexities in the transfer process and uncertainties in financing of projects put up for bidding on a DBFOT model and instead recommended a Build-Own-Operate (BOO) model for the UMPPs.

The same companies with the addition of GMR Energy are also the pre-qualified bidders for the Odisha UMPP and the same concerns have been raised by them about the bidding process there.

“Reliance Power Ltd, which has also competitively bid and won 3 out of the 4 UMPPs already bid out, have also expressed its agreement with the views of the above pre-qualified bidders,” the APP stated in its letter.

(This article was published on June 17, 2014)
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