Objecting to the structure and model of the proposed Standard Bidding documents (SBDs), private power producers lead by Tata Power and Reliance Power have cautioned against making any drastic changes in the SBDs warning it would not be possible for them to put competitive bids under proposed new norms.
The assertion by the two leading private sector players in the power sector comes close on the heels of the objections raised by the Central Electricity Regulatory Commission (CERC) over the new SBDs. The Empowered Group of Ministers (EGoM) is scheduled to meet on August 8 (Thursday) to give a final shape to the SBDs to kick off the second round of ultra mega power projects (UMPPs).
In separate representations to the Minister of State for Power (Independent charge), Jyotirditya Scindia, both Tata Power and Reliance Power have stated that although earlier SBDs could be fine tuned to address the issues relating to fuel risks, change in law in coal source countries and other uncontrollable events, any drastic changes in the existing framework would prove to be disastrous.
In his letter to Mr. Scindia, Reliance Power CEO, J.P. Chalsani said the new proposed SBDs come with drastic changes which are not adopted evening developed economies and is completely out of sync with the current market realties. ``In a developing economy such as ours, where capital is constrained, the SBD need to address the concern of all stakeholders including developer, lender, off taker, etc, which is substantially missing in the new SBD. The new formulation crafts a strict, prescriptive and rigid policy framework along with arbitrary price caps and pre-determined escalation factors that seemingly attempts to foresee market dynamics and other aspects of power plant development and operation through the life of the project,’’ Mr. Chalsani states.
Stating that the proposed changes are too superficial and too little to correct the core conceptual shift, Tata Power Managing Director, Anil Sardana in his communication to Mr. Scindia said government should come out with a framework that serves the development aspect more predictably. He said the current draft model power purchase agreement (MPPA) does recognise the impossibility of passing the long term fuel risks to the project developers, but puts forward some very complex structures and offers differential treatments on the basis of ownership and location of coal assets. Similarly, the fixation of imported coal price, the segmented treatment between coal procured from captive mines overseas and coal procured from open international market defy logic and was not based on market realities.
Further, Mr. Sardana states the current MPPA, is, by the very construct, quite intrusive and prescriptive. ``The qualifying criterion set in the document in terms of qualifying investments appears to be too stringent. Besides, the recommendation to short list only 7 to bidders for the RFP stage could be very restrictive and such a stipulation may restrict development of new qualified developers and therefore affect the sectoral growth. ``To conclude, if concerns raised are not addressed appropriately, we would not be able to put a competitive bid,’’ he adds.