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Pvt power producers slam govt for proposed cost-plus regime for PSUs

Pvt power producers slam govt for proposed cost-plus regime for PSUs

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Private power producers have slammed a proposed amendment to the electricity tariff policy as “regressive”, saying re-introduction of cost-plus regime for calculating cost of power produced by PSUs like NTPC shields them from competition and is “anti-consumer”.

The Association of Power Producers (APP), in a July 13 letter to the Power Minister R K Singh, said the preference for the cost-plus regime, where a generator is compensated for its entire cost plus a mark up, has led to purchasing of power from state-owned power plants at Sholapur and Barh Stage-2 at Rs 5.30 and Rs 5.68 per unit respectively against private power owners willing to supply the same for Rs 3-3.25.

Greenfield projects commissioned after 2010 of NTPC generate power for Rs 5-7 per unit as compared to a maximum cost of Rs 4.17 of a private generator, it said.

“Presently, with sufficient generation capacity available, such exemption from competitive framework is neither needed nor desirable. It would act as an obstacle for development of power market and different market products therein which can serve the diverse needs of power by different consumer categories,” it said.

The Association cited the example of renewable energy sector which has successfully migrated to competitive procurement and has seen substantial drop in cost of power.

It said the Tariff Policy, 2006 stipulated all future requirement of power is to be procured through competitive bidding with exemption for public sector projects for five years, that is till January 2011.

“This was in line with the objective of Tariff Policy, 2006 to ensure availability of electricity to consumers at reasonable and competitive rates. The five year moratorium was given to NTPC to get adjusted to competitive regime of power procurement,” it wrote. “With the proposed amendment, the de facto situation should not be converted to de jure situation with reversing of the earlier progressive framework of 2006.”

NTPC had requested for extension of January 2011 timeline which was not agreed to by the Ministry of Power based on CERC advice dated September 16, 2010 that said tariffs discovered through competitive bidding route significantly lowered cost of electricity than regulated ones under cost-plus regime.

Giving illustrations, the Association said in the last 8-9 years, all components of the cost of supply that are controlled by government monopolies have seen an increase of up to 300 per cent while the cost of generation (where private sector has contributed significantly) has come down by 21 per cent due to enhanced efficiency.

“Despite the fact that cost-plus regime has not led to reasonable and competitive rates, it is surprising to note that contrary to the advice of CERC, the Ministry of Power is again proposing to reintroduce this regressive provision of cost plus regime for Central sector generating stations,” it wrote.

The proposed policy framework should in fact move forward and bring the state sector generating stations also in the competitive bidding framework, it wrote.

“We request you to consider the continuation of earlier framework for promoting competition in power generation segment, as in the current scenario, exemption of any generation entity from competition would be against the provisions of the Electricity Act, as well as the overall objectives of improving efficiency and reducing cost of power,” APP Director General Ashok Khurana wrote.

The proposed amendment to the Tariff Policy of 2006 is “a very regressive provision” that protects Central sector generating stations from competition and reintroducing cost-plus regime which is ” discriminatory and anti-consumer”.

“The proposed amendment would have wide ranging impact on investments in power sector and especially in generation segment,” it said, adding that the proposed provision discriminates on the ground of ownership — public vis-a-vis private.

Source: PTI
Anand Gupta Editor - EQ Int'l Media Network

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