Pratim Ranjan Bose
This is unprecedented.
Imagine you bid for a contract.
Considering the risks attached, you have quoted a price of say ` 100. But, someone else, with
higher risk appetite, grabs the contract by quoting a price of say `80.
A few years down the line the
winner party complaints that he has taken too much of risks leading to huge
losses. And to ensure his viability, the project authorities now agree to offer
him a higher price of `100.
You end up making a fool of yourself, amid complete mockery of tendering
norms.
 |
| Image courtesy: www.urbansamurai.com |
Almost the same thing happened
with the recent order of Central Electricity Regulatory Commission (CERC) that granted
higher electricity tariff (referred as compensatory tariff) to mega-sized
generation facilities Tata Power and Adani Power both located at Mundra in Gujarat .
Mockery of tendering norms
Both of them, won contracts to
supply electricity to a number of State distribution utilities promising cheap
levelised (flat) tariff on long term basis, ranging up to 25-years.
Both proposed to source part of
the coal requirement from their mines in Indonesia , to justify such
cost-economics. And, both are in a problem due to change in pricing methodology
for Indonesian coal.
It did not impact their earnings
from mining operations in Indonesia .
The foreign government ensured that coal must not be exported out of the
country below global market price, so that Indonesia gets its due share of
taxes and duties. Naturally, coal imported to India became costlier.
The problem is genuine.
But, Tata Power and Adani were responsible for inviting it. They took every risk of sourcing coal – so much so that they
did not opt for a cost-plus tariff model also on offer - and promised to supply
electricity at the cheapest rates, outbidding many others who were more
cautious in approach.
A post facto change in tendering
norm therefore goes against the sanctity of contracts and natural
justice.
 |
| Source: citizensforethics.com |
But CERC did exactly the opposite
citing “commercial impossibility” of fulfilling the supply contracts in
view of change in regulations in Indonesia .
A private dispute between
commercial organisations on fulfillment of contract obligation was converted
into a debate on the notional ability of private capital to produce “cheap”
electricity and the priority before the nation in rescuing such utilities from
going bankrupt.
Private or national cause?
The moral high ground, as set by
the CERC, is not new.
In fact, the very policy of
levelised tariff-based bidding was mooted way back in 2005 by the UPA government
in Delhi , as a
recipe to generate adequate cheap “electricity for all”.
Private capital, the then Union
power secretary was often found telling, had enormous risk appetite and ability
to supply power at the same rate for as many as 25 years. The State sector
units, including India ’s
largest power producer NTPC, which stuck to the cost-plus tariff model were dubbed as “inefficient”.
 |
| Source: http://jenn44.files.wordpress.com |
Today, the policy proved to be a
perfect recipe for disaster.
A total of 48,000 mw worth
generation capacities, which promised to sell electricity to various State
distribution utilities (Discoms) across the country, turned unviable.
A total of 19 such power producers
have already approached India ’s
apex regulator with a plea to reopen the contracts, they once grabbed quoting
rock bottom prices. With Tata and Adani are now allowed to walk free from the
contractual obligations; it is time for others to expect bail out packages.
And, that would surely put a
question mark on the moral and ethical ground of the regulator in revisiting
the business agreements.
Because, majority of the Indian
producers may be more affected by general uncertainties - like a slide in value
of Indian rupee against dollar that made imports costlier, the overall
inflationary trend or lower than anticipated availability of domestic coal –
which were overlooked during bidding.
In fact it is debatable if
majority of the affected producers, now looking forward to reopening of
contracts, have any mining operation in the archipelago.
An act of deliberate omission?
Going by the chronology of events
in the Indian energy space since 2005, one may wonder how the best brains in
business, politics and administration could overlook gaping the holes in the tariff
based bidding policy.
 |
| Source: www.uow.edu.au |
None questioned how electricity
could be supplied at as low a price as `2.35
a unit for the entire lifespan of a generation capacity? No one pointed out
even an increase in price of domestic fuel can upset the viability of such
generation plans.
The silence was eerie and raises
concerns of a deliberate omission.
***
No comments:
Post a Comment