State discoms may cap costs of thermal power plants before inviting bids for power supply

New Delhi:The government will ask state electricity distribution companies to cap costs of coal-based power plants before inviting bids for power supply, a move set to be challenged in court by power producers this week as they foresee lower margins and difficulty in raising funds. 

The power ministry, on Wednesday, issued an order proposing to amend guidelines for power procurement by states. “We have proposed to amend the future procurement of power from thermal power states. Power distribution companies, in consultation with their regulatory commissions, will determine an upper ceiling for fixed costs for every unit of power. The fixed cost will be indicated in advance to all bidders before the distribution companies invite bids for power supply,” a government official said. 

“If this is not done, the reverse coal process will be vitiated. This is to ensure that no undue and ineligible cost is loaded on the fixed charge,” he said. The government has also issued directions to state electricity regulatory commissions to reopen power purchase contracts to revise electricity tariffs downwards. “The government should have informed bidders before coal auction that it will put a ceiling on fixed costs in future contracts. We have agreed to forego our mining costs during auction. This ceiling will render our projects unviable. Banks will not lend to us,” an executive of a company that plans to move court in couple of days said requesting anonymity.

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