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