Railways to hire a consultant for price-review mechanism

Mamuni Das

The Railways has floated a tender inviting bids from independent power producers for supplying 350 MW power in Gujarat and Maharashtra.

New Delhi, Sept 1

Several domestic companies such as Ashok Leyland, NTPC, Nuclear Power Corporation, Tata Power as well as American and Russian firms are learnt to be in talks with the Indian Railways for entering into long-term agreements for supplying electricity.

The Railways proposes to draw power from independent power producers (IPPs), to further reduce the cost of electricity per unit.

"We are exploring the option to draw power from IPPs, particularly in Gujarat and Maharashtra regions, for which tenders have already been floated," Mr Ramesh Chandra, Member-Electrical, Indian Railways, told

Business Line

.

The Railways had floated a tender inviting bids from independent power producers for supplying 350 MW power in Gujarat and Maharashtra.

It was considering floating tenders for other areas, including Andhra Pradesh, Tamil Nadu, Bihar and West Bengal, he added.

The Railways consumes about 2,000 MW annually.

Hiring Consultant

The Railways is in the process of hiring a consultant, which would advise the Ministry regarding certain terms for its tender inviting private power generating companies for long-term supply of electricity.

"Since the Railways would enter into agreements spread over 15-20 years with the IPPs, we would like to have a price variation clause or a price review mechanism for the period to protect against change in market conditions," Mr Chandra said. "Several domestic companies, apart from some American companies and Russian companies have approached us for such projects," he said, declining to divulge the names of firms.

According to sources, those in talks with the Railways include NTPC, Tata Power, Hindujas, Ashok Leyland and Nuclear Power Corporation.

Long-term customer

Power companies want to do business with the Railways as it is a long-term customer with a high demand, regular paymaster and the Railways draw more power at night, when the industrial and domestic demand is relatively low.

"We make our payments to power utilities on the due date. Even if there are any disputes, they are followed later but the payment is not stopped," he said adding that the Railways demand is high at night, which is when the utilities have surplus power.

This results in better utilisation of load factor for the power companies.

(This article was published in the Business Line print edition dated September 2, 2006)
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