Pvt power producers slam govt for proposed cost-plus regime for PSUs

Private power producers have slammed a proposed amendment to the electricity tariff policy as "regressive", saying re-introduction of cost-plus regime for calculating cost of power produced by PSUs like NTPC shields them from competition and is "anti-consumer".

The Association of Power Producers (APP), in a July 13 letter to the Power Minister R K Singh, said the preference for the cost-plus regime, where a generator is compensated for its entire cost plus a mark up, has led to purchasing of power from state-owned power plants at Sholapur and Barh Stage-2 at Rs 5.30 and Rs 5.68 per unit respectively against private power owners willing to supply the same for Rs 3-3.25.

Greenfield projects commissioned after 2010 of NTPC generate power for Rs 5-7 per unit as compared to a maximum cost of Rs 4.17 of a private generator, it said.

"Presently, with sufficient generation capacity available, such exemption from competitive framework is neither needed nor desirable. It would act as an obstacle for development of power market and different market products therein which can serve the diverse needs of power by different consumer categories," it said.

The Association cited the example of renewable energy sector which has successfully migrated to competitive procurement and has seen substantial drop in cost of power.

It said the Tariff Policy, 2006 stipulated all future requirement of power is to be procured through competitive bidding with exemption for public sector projects for five years, that is till January 2011.

"This was in line with the objective of Tariff Policy, 2006 to ensure availability of electricity to consumers at reasonable and competitive rates. The five year moratorium was given to NTPC to get adjusted to competitive regime of power procurement," it wrote. "With the proposed amendment, the de facto situation should not be converted to de jure situation with reversing of the earlier progressive framework of 2006."