| The move is aimed at introducing market-based price discovery for electricity and curbing nontransparent bilateral ties between states and power plants that are not recognised under the Electricity Act, according to the proposal from the power ministry. The proposal has, however, evoked mixed response from the industry. The ministry has issued draft guidelines for sale of power by generating and surplus distribution companies in short-term period of one year, and has sought comments from stakeholders. As per the proposal, generating companies will be able to seek bids for power supply rather than waiting for distribution companies to demand.Indian power sector has always been driven by demand. It is only at the day-ahead power exchange that sell bids are put by power generation companies or power surplus distribution companies. “Selling power by generators by calling bids from discoms is an innovative initiative by the power ministry,” said Ashok Khurana, director general at Association of Power Producers. “Documents circulated for comments would need certain changes for simplifying the process. We welcome this initiative. Let us see how the discoms respond to this reverse procurement process,” he told ET. Some industry insiders, however, said implementation of the draft guidelines might face technical and legal challenges. "The Electricity Act emphasises on competitive price discovery and the present guidelines provide for discoms seeking bids. It remains to be seen how the bidding will be conducted, how will the discoms respond and how regulators will adopt the tariff," an executive with a power company said. As per the proposal, power plants or discoms with surplus power can invite bids on the Centre’s e-bidding DEEP portal, either by themselves or through an aggregator. Bids can be called for different time slots and the highest bidder for the power will win contracts. The power ministry said the ebidding process will put an end to the bilateral contracts between power plants and distribution companies. A senior government official said this is a pilot towards shifting to market-based price discovery for electricity. The guidelines enable power plants to sell their produce without waiting for discom tenders. The move is aimed at helping stressed plants and avoiding such problems in future, the official said. Lack of power purchase agreements (PPAs) is one of the key reasons for stress in the sector, along with factors such as promoters’ equity crunch, no coal supply, and regulatory and contractual issues. Electricity distribution companies have not called enough medium and long-term contracts in the last few years. The power ministry has timed the proposal with the cabinet approval to coal allocation to shortterm contracts. The Union cabinet on March 7 had lifted restrictions on coal allotment to merchant power plants. |