Railways begin direct power purchase costs

Move likely to lead to over 20% savings in power bill for national transporter

Indian Railways (IR) on Thursday switched to a new low-cost model of power purchase, in which electricity would be bought directly from generating companies through open competitive bidding, as against the current practice of sourcing traction power from state utilities and state electricity boards.  The move is likely to lead to 20 per cent savings in power for the transporter.

IR consumes around 4,000  Mw power annually at a cost of around  Rs 12,000 crore. Kick-starting the process, North Central Railway on Thursday signed a Power Purchase Agreement (PPA) with Adani Power for sourcing  50 Mw at Rs 3.69 per unit over three years. Through this PPA railways could save upto Rs 150 crore on electricity bill this fiscal.  Adani Power will supply the electricity from its 4,620 Mw power plant at Mundra in Gujarat.

"Railways have been procuring power through state utilities at an average Rs 6.75 per unit. Adani Power have been awarded the contract at a landed tariff of Rs 3.69 per unit for three years," the rail ministry said in a statement.

The electricity will be received at Dadri and Phaphund powergrids from where Indian Railways will take the power, when the supply commences before March 2016. The ministry said the agreement between North Central Railway and Adani Power was signed after successful bidding using the model document issued by the Power Ministry. Railways had embarked on the new model of direct sourcing from generators after a clarification from the Power Ministry regarding its “deemed licensee” status.

“It is a big challenge. We have to augment revenue and rationalise cost of operation. We will use a mix of energy including solar and buying power directly,” rail minister Suresh Prabhu said. He had in this year’s rail budget suggested railways can save around Rs 3,000 crore annually by rationalising power cost.

In the next phased of power procurement under the new model, railways will seek to sign PPAs for procuring 440 MW of power for the western region, 350 MW for the eastern region and 220 MW for the northern region. Officials said the initiatives are likely to lead to reduction in power cost to less than Rs 4 per unit from around Rs 6.75 per unit currently.

In addition, railways has also tied-up with Ratnagiri Gas and Power Ltd (RGPPL), the operator of the Dabhol power plant in Maharashtra, for procuring 500 Mw power at Rs 4.70 per unit. It has also floated tender seeking 585 MW power for various states on behalf of Zonal Railways.