Power Ministry proposes Standard Bidding Document for Discom privatisation

Our Bureau New Delhi | Updated on September 22, 2020 Published on September 22, 2020

The Power Ministry has proposed a Standard Bidding Document (SBD) that can be referred to during privatisation of power distribution business in States and Union Territories.

Under the proposed document, significant loss-making power distribution companies (Discoms) with medium to high Aggregate Technical & Commercial losses (AT&C) Losses of above 15 per cent may be bid out on AT&C Loss reduction commitment for the first five years. The fixed parameter will be the consideration for sale of equity shares in successor entity.

A second bid parameter has been proposed in case of Discoms with lower than 15 per cent AT&C Losses (or with negligible ACS-ARR gap). The SBD suggests that the bid parameter may be upfront premium for equity consideration in the Distribution Company. A fixed AT&C Loss trajectory for next five years may be specified in the request for proposals (RFP) which shall be adopted for tariff determination, the SBD said.

The SBD also notes that the Power Purchase Agreements (PPA) of existing distribution licensees shall be transferred to the successor entities. “Only in specific cases where there is a significant gap between Average Revenue Realized and Average Cost of Supply, PPAs may be retained in a State or Union Territory (UT) Government entity to structure a subsidised bulk power purchase cost for the successor entity for making it an independently financially viable entity, for a specified period,” the SBD proposes.

“The successor entity shall be provided with a clean balance sheet free of accumulated losses or unserviceable liabilities. Further, wherever required, the concerned State or UT Government may provide suitable transition support to the successor entity for a specified period of say 5 or 7 years,” the SBD added.

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Published on September 22, 2020
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