Editor's Note

Power Watch India - - NEWS -

Many im­prove­ments are ex­pected for the power sec­tor in the near fu­ture. The govern­ment pro­poses to bring in the long pend­ing ‘Elec­tric­ity (Amend­ment) Bill 2014’ for pas­sage and con­sid­er­a­tion in the Lok Sabha and Ra­jya Sabha in the Win­ter ses­sion of Par­lia­ment in De­cem­ber. Seg­re­ga­tion of wires and sup­ply is one of the ma­jor mod­i­fi­ca­tions that is ex­pected to get ap­proved with this amend­ment. The govern­ment has al­ready an­nounced Ujwal Dis­com As­sur­ance Yo­jana (UDAY) for im­prov­ing dis­com work­ing by as­sur­ing them an­other debt re­struc­tur­ing pack­age. This is ex­pected to re­duce ATC loss, im­prove the fi­nan­cial po­si­tion of dis­coms and im­prove the health of gen­er­at­ing com­pa­nies from whom the dis­coms are pur­chas­ing power. As a re­sult the trans­mis­sion sec­tor will also be a ben­e­fi­ciary of this scheme.

So­lar power de­vel­op­ers are fol­low­ing their ther­mal power coun­ter­parts who a few years back com­peted with each other by quot­ing very low tar­iffs. Most ther­mal power de­vel­op­ers are fac­ing dif­fi­cul­ties in meet­ing their price obli­ga­tions due to in­creased fuel cost. Though fuel is not a con­cern for so­lar de­vel­op­ers, life­time of the equip­ment and main­te­nance cost is a worry since many of them are not sure about the qual­ity of prod­ucts. If the trend con­tin­ues, they may have to face the same mu­sic which ther­mal power gen­er­a­tors are fac­ing to­day, due to an in­crease in cost of pro­duc­tion. Gen­er­a­tors ex­pect reg­u­la­tors to ap­prove cost es­ca­la­tion by open­ing the con­tracts again. Gen­er­a­tors sell­ing power in the mer­chant mar­ket are the worst suf­fer­ers. Re­cently NTPC in­vited bids to set up a 500 MW so­lar plant at Ghani So­lar Park in Andhra Pradesh un­der the Na­tional So­lar Mis­sion. Low­est quoted tar­iff in price bid was Rs 5.21 per unit and weighted av­er­age quoted tar­iff in price bid was Rs 5.33 per unit. E-re­verse auc­tion was con­ducted there­after. The weighted av­er­age tar­iff was Rs 4.63 per unit, a re­duc­tion of Rs 0.70 per unit in the re­verse auc­tion. So­lar tar­iff is re­duc­ing day by day due to fierce com­pe­ti­tion be­tween de­vel­op­ers.

Some de­vel­op­ers opine that such a low tar­iff is un­sus­tain­able. Sim­i­lar opin­ions were ex­pressed when low ther­mal tar­iffs were be­ing quoted but de­vel­op­ers con­tin­ued to quote un­re­al­is­tic tar­iffs to grab con­tracts. The risk is not only that of de­vel­op­ers but is passed on equally to the pro­curer since they are try­ing to en­ter into long term con­tracts with­out be­ing sure about the de­liv­ery for the en­tire pe­riod of the con­tract. Com­pe­ti­tion may lead to many pay­ers be­ing thrown out of the busi­ness but the real risk is with the banks and FIs who are fund­ing th­ese projects. Banks will have to con­tinue to fund them since they do not want the projects to be­come NPAs and in the process would go fur­ther into the red. Fi­nally the govt will have to res­cue them and his­tory may re­peat it­self again. Con­sumers would be happy if they take a short term and short sighted view, but over a long term they would be re­quired to pay higher tar­iffs for the same power. Hope good sense pre­vails and the party eval­u­at­ing th­ese con­tracts re­ject very low, un­vi­able of­fers.

Jayant D Kulka­rni

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