Gas power projects via tariff-based bids soon

The government proposes to make it mandatory to award gas-based power projects on competitive tariff-based bids.This is aimed at making gas-based projects competitive vis-à-vis coal-run projects once the government ends cost-plus tariff regime in January 2011. Power developers have hailed the move.Beginning, January 5, 2011, all electricity distribution licensees will have to procure electricity based on tariff-based competitive bids. Power generators, private or public, will not be allowed to enter into power purchase agreements on cost-plus, regulator determined tariffs with state distribution companies.

"When cost plus regime makes way, gas-based project developers may find it difficult to sell electricity from their plants as gas is costlier than coal. Power from gas projects costs developers Rs 2 per unit as compared to about Rs 1.5 per unit from coal-fired projects," a power ministry official told media.

Power secretary Uma Shankar confirmed the development. "Once a developer sets up gas-based project, how does he sell power? Earlier they used to sign power purchase agreements with distribution companies. But now they will have to be competitive in pricing," he said.

If competitive bidding is introduced, gas projects will not be required to compete with coal-fired projects, he said. The power ministry is considering both case-I and case-II bidding procedures for determining tariff from gas-based projects.

Under case-I bidding, distribution utility invites tariff-based competitive bids for required capacity but does not play any role in procuring land, fuel and regulatory clearances. This is unlike case-II bidding -- followed for awarding ultra mega power projects, where government assumes the role of a facilitator.

Power ministry officials are likely to deliberate the issue with Central Electricity Authority (CEA) next week.

GMR Energy chief executive officer Raaj Kumar said, "Any kind of tariff-based bidding is welcome for consumers as well as developers. It also reduces risk exposure from fluctuations in gas price and currency. Typically, when gas price is at $ 6 per million metric standard cubic meters per day (mmscmd), power costs around Rs 2.2 per unit to developers as against coal based generation at Rs 1.2 per kWh."

Meanwhile, an official in Lanco Infratech also welcomed the move. The official said that in next five years only 60 mmscmd extra gas was likely to be available from domestic resources that could feed additional generation of about 8,000-mw. Presently, India's demand for natural gas is pegged at 170 mmsmcd of which 142 mmscmd is sourced from domestic fields and rest is imported.

The country's natural gas production from home fields is expected to touch 151 mmscmd by 2011-12 and 186 mmscmd by 2012-13. Reliance Industries Ltd operated D6 block in KG basin is at present producing 55-60 mmscmd. The production is expected to touch only 80 mmscmd by 2012-13. Maharashtra State Power Generation Corporation, Torrent Power, GVK Power, GMR Energy, and Gujarat Powergen Energy Corporation are some of the companies that have submitted request for gas allocation for projects coming in the 3-4 years.

CEA, planning body for the power sector, has rece­ived over 104 applications fr­om government and private project developers seeking gas supply to fuel nearly 1,18,000-mw capacity. The projects would require gas supply of 570 mmscmd at 90 per cent plant load factor. All the projects are proposed to be operational in the 12th pl­an period starting 2013. Co­al and gas linkages to po­wer projects are based on re­c­o­mmendations made by CEA.

The government has decided to weed out non-serious private companies seeking gas for power projects with a stiff grading system in place. As per the proposal, only companies with firm land, water allocation, sound financial background and equipment sourcing contracts would be preferred for gas linkages.

Bids for 4000 MW power project in Orissa to be delayed:Shinde

Government on Thursday said invitation of bids for a 4,000 MW ultra mega power project in Orissa would be deferred for the fourth time on environment issues . 

"It (bids for Orissa UMPP) will get delayed by about a month or so," Power Minister Sushil Kumar Shinde said. 

The last date of submission for bids for the Bedabahal UMPP in Orissa was November 30. 

But the Ministry of Environment and Forests (MOEF) is yet to give clearances for the coal blocks--Meenakshi, Meenakshi-B and Dip side of Meenakshi -- allotted for the project. 

The Power Ministry wants to complete its homework on the projects like -- forest clearance of the coal blocks for the project -- before inviting the initial bids. 

"I dont want developers to come and complain (about any discrepancy) later," he added. 

MOEF classified 'no-go' areas as the zones where mining activity could not take place as it would have adverse impact on the environment. 

One of the coal mines for the project fall under the 'no-go' category. 

Bidding process for another such project at Sarguja in Chhattisgarh has already been delayed by two months from its prior date of November 8 due environment concerns, as the coal mines allotted for the project also fall under the 'no-go' category. 

Government plans to add about 1,00,000 MW of power, of which a lion's share would be contributed by such UMPP projects. 

It has awarded four such projects so far, three of which are at Sasan (Madhya Pradesh), Tilaiya (Jharkhand) and Krishnapatnam (Andhra Pradesh). 

Tata Power is developing the fourth project at Mundra in Gujarat.

Power ministry seeks expert opinion for Rs 50,000 crore debt fund

The power ministry is consulting financial experts to work out the modalities of the proposed Rs 50,000-crore debt fund to finance electricity generation, transmission and distribution projects. "We are in talks with some economic experts...Can't name them right now, they would advise us on the debt fund...How to go about it," a power ministry official said.

The ministry is mulling to set up a debt fund for financing projects with an estimated corpus of Rs 50,000 crore.

State-run lenders Power Finance Corporation and Rural Electrification Corporation may also be roped in for the same.

The ministry is also in constant dialogue with the Planning Commission to work out a blueprint of the proposed fund.

Meanwhile, the Planning Commission has proposed a Rs 1,00,000-crore National Electricity Fund (NEF) to finance development of power transmission and distribution network in the country, which would soon go to the Cabinet for its approval.

The plan panel had last year announced setting up of NEF to finance the development of power transmission and distribution network by state utilities, so as to reduce transmission and distribution (T&D) losses.

It had suggested that the government should provide interest subsidy aimed at bearing part of the interest cost by the Centre. For example, if a state utility plans to raise funds at an interest rate of 10 per cent, four per cent of that would be borne by the government.

Power Finance Corp and Rural Electrification Corp are likely to be the nodal agencies to finance state utilities, as a part of NEF.

The support of World Bank and Asian Development Bank could be sought for improving electricity transmission and distribution network in the country.

New setup in works to monitor power projects

The government has put in place a special monitoring mechanism under the Cabinet Secretariat to see that country’s capacity addition programme in the power sector proceeds smoothly. 

The fresh intervention comes at the behest of the Prime Minister’s Office that is concerned that delays in power projects being reported at regular intervals may again derail the country’s capacity addition programme. 

The country’s Eleventh Plan (2007-12 ) target of generation capacity addition has already been revised downwards to 62,000 MW from 78,700 MW. Even this is unlikely to be met as just about half of the target has been achieved so far. 

The Cabinet Secretariat plans to oversee progress of power projects on a monthly basis with special emphasis on activities getting delayed on a regular basis. 

"We have been asked to send progress on implementation of power projects to the Cabinet Secretariat on a monthly basis with details of activities getting delayed or showing deviation from the agreed timeline," said an official in the power ministry. 

"This report also has to give reasons for the delay, corrective action initiated and the revised timelines," the official involved in the process of preparing report for the Cabinet Secretariat said. 

The government has already formed a panel of officers headed by the cabinet secretary to review capacity addition. Another committee headed by the secretary, heavy industries , and senior officials from the ministry of power, CEA, NTPC and BHEL as members will regularly evaluate commissioning of power projects. 

It has been decided that the new set up will not only identify and rectify delays but will also put in a mechanism to fix responsibility and take strict action for lapses. 

One of the reasons for the delay has cited in the inability of BHEL to stick to its delivery schedules. The power equipment manufacturing PSU on the other had has cited certain logistical issues as reasons for delay in equipment reaching the desired destination. 

In this regard it has been decided that the expert technical group (ETG) under the heavy industries ministries will prepare a generic logistic plans for speedy transportation of heavy and over sized dimension consignments of power equipment to various project sites in the country. 

The country’s currently has an installed generation capacity of about 1,60,000 MW. Even at this level, India faces high energy deficit of over 10% and equally high peaking power deficit of over 13% or close to 16,500 MW.