Power ministry cancels UMPP bidding; new bid document soon

Setback for NTPC; move aimed at ensuring private sector participation

The ministry of power has decided to cancel the two-year-long bidding process for two ultra mega power plants (UMPP) in Tamil Nadu and Odisha. The decision comes in the wake of private companies pulling out of the process, with public sector units NTPC and NHPC emerging as the only bidders.

In a letter to Power Finance Corporation, the convenor for the bidding, the power ministry said fresh bidding would be according to the new standard bidding documents. It is likely to be drafted in the next two months. The ministry would oversee fresh bidding.

Officials in the know said Piyush Goyal, minister of state for coal, power and renewable energy, has also pushed for necessary changes in the bidding regulations, for restricting investment in power generation business.

POWER PANG

• UMPPs bidding for Tamil Nadu and Odisha started in 2012
• Private players contested the bid document
• All potential bidders pulled out in October 2014
• NTPC bid for Tamil Nadu wasn’t opened on Dec 26
• Government to frame new bid document for UMPPs
• Goyal batted for private sector investment

Private players, in prior communications with the ministry of power, had raised concerns on the design, build, finance, operate, and transfer (DBFOT) model for the UMPP. They had said they might not invest in the mega plan.

Through the Association of Power Producers, the private sector had highlighted that the DBFOT model does not apportion risk equitably. "All losses go to the power generator and gains to the procurer, leaving the power producer as a contractor," said APP.

For the Tamil Nadu UMPP, the private companies in the fray were Adani Power, CLP India, Jindal Steel and power, JSW Energy, Sterlite Energy and Tata Power. Of these, four bought the Request For Proposal document but decided not to go further in the process. NTPC gave its bid, which wasn't opened on December 26, the last day of submission, as there had to be at least three bid quotes for choosing the final winner. It was so, too, with the Odisha UMPP, which saw nine interested bidders, including Adani Power, CLP India, GMR Energy, Jindal Steel and Power, JSW Energy and Sterlite Energy. After the private companies pulled out, only NTPC and NHPC were left. The bid to be opened on January 7, stands cancelled now.

With this, NTPC also lost the chance to build its first UMPP. "It is the correct step. All of us want competitive and sustainable price discovery, which was not possible under the proposed documents. We are looking forward to new bid document," said A K Khurana, director general, APP.

Power Finance refused to comment on the development, citing it as an issue now in the hands of the power ministry.

Of the 16 UMPPs the previous central government planned to set up, four have been awarded - three are operated by Reliance Power (in Sasan, Tilayiya and Krishnapatnam) and one by Tata Power (Mundra). These projects had been awarded on a competitive rate-based bidding and implemented by a special purpose vehicle.