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Case 1 and Case 2 Bidding: Demystifying Competitive Regime in Indian Power Sector
Infraline Energy, April 2011, Pages: 120
It is surprising that India is one among the highest electricity tariff paying nation in the world despite the fact that 40 per cent of its population is still under the BPL (Below Poverty Line) category. As successfully demonstrated in the global arena, the prevailing power prices can be brought down signi?cantly to the tune of 30 per cent by inducing competition in the wholesale electricity market. As believed by the policy makers and analysts, the recent reform – Power procurement on Competitive basis would be the best possible initiative to foster laissez-faire system in Indian power sector which was traditionally dominated by the public monopolies.
Given the fact that several private players have now emerged on the scene, cost-plus tariff is being seen as relic of the past as the returns from competitively bid projects are varying from a low of 14 per cent to astonishingly high of 95 per cent. Thus it is evident that the introduction of competitive regime has led to a winwin situation for both states as well as private developers.
While the inception of competitive bidding regime has marked reduced power tariffs across countries and businesses, the fact is that it is still not well understood in the Indian context. The country is still in the process of understanding free market dynamics and it would take its own time in evolution and appreciable participation.
While India discovers the beauty of competitive bidding in terms of lower tariffs through Case I and II bidding, the state discoms in the last couple of months had signed Memoranda of Understanding (MoU) with NTPC Ltd. for their future power requirements. This in turn has raised eye brows of all the analysts and regulators in the market. The aggression of NTPC in shielding itself from the competitive regime by getting into agreement for 75 GW,
questions the operational effectiveness of the power giant. When the time is reap for the power behemoth to show its strength in terms of project execution, operational and commercial expertise, the back tracking and welcoming of private players to grab the generation sector without offering a slight resistance arises big concerns among the think tanks. Will NTPC face the same debacle like that of BSNL in the long-term, only time can answer?
In this milieu, the authors will take a peek into the development of the regime and drive deep to ?nd out the reasons as to “why states like Gujarat are so aggressive about marking the end to regulated return era?”, The extensive research on this background will clarify whether Case I and Case II bidding are the best tools for better price discovery or will it prompt the states to be power traders in the long run. Do the states actually need these huge volumes of power or will they trade it in the short-term market? What is in store for the private developers in Case I and Case II bidding? Are they really getting bene?ted from the competitive regime or would it put pressure on their operational margins in the long-term?
Queries like these and many more boasting facts get a dig in the authors attempt to demystify the competitive regime in lieu to project a path ?nding guide for all stakeholders with this report. Also, the report covers detailed analysis through evaluation of all intricacies and nuances involved to redeem an exclusive score card of discoms as procurers and elucidate all possible key winning strategies for investors by overcoming the associated concerns, constraints and challenges. This Report not only discovers the unexplored but also examines the latest initiatives by Central and State Government, and thus establishes a road map for competitive regime in the long-term.
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