NEW DELHI, June 20: Amid electricity producers facing issues with fuel price volatility, Government is looking to ensure necessary “risk mitigation” measures are in place for upcoming projects where location and fuel are already decided.
The Power Ministry has finalised the changes to Case II competitive bidding norms for new projects. In Case II, the location of the project and fuel to be used are already decided before start of competitive bidding.
The revised guidelines would be in place once it is approved by the Empowered Group of Ministers (EGoM) headed by Defence Minister A K Antony.
“We will focus on risk allocation and risk mitigation measures (in revised Case II bidding norms)… In the new bidding norms, we will try to balance risks faced by power producers and power procurers,” a Power Ministry official said.
The official did not elaborate on whether higher fuel costs would be made pass through to the consumers.
With significant volatility in fuel prices, especially in imported coal costs, many power generators are adversely impacted since they don’t have the option to pass through the higher costs to end consumers.
Indian power sector, which is projected to see a capacity addition of about 88,000 MW in the current Five Year Plan (2012-17), is grappling with multiple woes including fuel scarcity, environmental hurdles and weak financials of distribution companies.
Meanwhile, for upcoming projects to be awarded through Case I route — where developers have the choice to decide on location, fuel and technology to be used for the plant — higher fuel costs is expected to made pass through.
Experience has shown that it might not be feasible for power producers to have stable fuel costs for the entire period of the project, experts said.
In the context of Case I norms, a Power Ministry official had said that fuel costs cannot be made a basis for bidding and it has to be pass through to the procurers.
“Once made pass through, there should be certain efficiency parameters and safeguards are in place to ensure balance between the interests of power producers and procurers,” the official had said recently. (PTI)
Follow our WhatsApp channel