Private power producers demand level playing field in allocation of transmission projects

The Independent Power Producers Association of India (IPPAI) has shot off a letter to the Power Ministry demanding level playing field for private sector players via-a-vis state-run Power Grid Corporation of India (PGCIL) in allocation of electricity transmission projects.

"We seek your suo moto intervention in this matter in the interest of maintaining a level playing field in this segment (transmission) of the power sector and to stop the misuse of public funds which are procured at very low costs (by PGCIL) from multilateral agencies against sovereign guarantees of the Government of India," IPPAI said in its letter written earlier this week to the power secretary.

The industry body pointed out that in view of the dominant position of PGCIL reflected in its predatory bid pricing, the ministry should ensure that the low-cost pool of funds raised by the company are not allowed to cross-subsidise TBCB (tariff based competitive bidding) projects.

The IPPAI also sought separation of the central transmission utility (CTU) role of PGCIL from its role as an asset developer to create a level playing field for competition and ensure delivery of the cheapest cost of landed power to consumers.

It claimed that PGCIL often gets projects on a nomination basis under Section 62 (cost plus) of the Electricity Act 2003 and is allowed a pass through of any cost escalation which is incurred due to any delays in projects.

However, it said that the projects competitively bid under Section 63 (which are primarily done by private sector transmission companies) are imposed with stiff penalties by the regulators for delays.

According to IPPAI, PGCIL beats the competition by quoting low prices due to diversion of funds from the parent company (PGCIL) to the SPVs (special purpose vehicles or projects) at a very low carrying cost since these funds, which are from multilateral agencies, are lent under the sovereign guarantee of the Government of India.

Besides, it is able to divert resources from projects being built under Section 62 to projects under Section 63 (TBCB) without fear of loss since any delays or carrying costs in projects under Section 62 are allowed as a pass through, it added.