The power ministry has decided to defer the plan to introduce tariff-based bidding for hydel projects by another six years to March 2022 owing to a lack of investor interest. Earlier, tariff-based bidding was to kick in after the scheduled expiry of the extant cost-plus regime by the end of 2015. The decision has been taken by the ministry on account of the falling share of hydel power in the country’s energy mix.
After the tariff-based bidding regime is implemented, power distribution companies (discoms) will have to invite bids from hydropower companies for power procurement. In contrast, they can source electricity through negotiations under the existing cost-plus regime. Bidding has been made mandatory for procuring electricity from coal and gas-fired plants since January 2006. But power producers have expressed their apprehensions on the proposal to implement bidding guidelines for procurement of electricity from hydel projects.
Unlike fossil fuel-based generating stations, setting up hydel plants is risky due to the possibility of geological surprises, which could lead to a sharp escalation in implementation costs and render the project unviable. Given the uncertainty over final tariff of hydel projects, discoms are slightly reluctant to sign power purchase agreements ( PPAs) for these projects. Hence the reported drop in private investors' interest in hydel projects.
“The matter (extending the bidding deadline for hydel projects from 2015 end to March 2022 ) has been considered by the power ministry. In view of the continued uncertainties and risks faced by these projects, it has been decided that the sunset clause be extended beyond the present deadline of 2015 up to the end of the 13th Plan (April 2017-March 2022) for both public and private sector players,” a ministry official told FE.
The industry is happy with the power ministry's move. “We thank the ministry for accepting our request to continue hydropower procurement under the cost-plus regime,” said Ashok Khurana, DG, Association of Power Producers, a body that boasts members such as Tata Power, Reliance Power, Adani Power and Lanco Power.
Hydropower has critical significance in the fight against climate change. But, in India, its share in the power mix has fallen to 17.7% (at the end of March 2013) from 26% at the end of March 2007, sending alarm bells ringing among energy policymakers.