Private Power Producers Demand Level Playing Field In Allocation Of Transmission Projects
Power transmission lines are suspended from electricity pylons. (Photographer: Steve Hockstein/Bloomberg)

Private Power Producers Demand Level Playing Field In Allocation Of Transmission Projects

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The Independent Power Producers Association of India has written a letter to the Power Ministry demanding level playing field for private sector players in comparison with state-run Power Grid Corporation of India Ltd. for allocation of electricity transmission projects.

“We seek your suo moto intervention in this matter in the interest of maintaining a level playing field in this segment (transmission) of the power sector and to stop the misuse of public funds which are procured at very low costs (by PGCIL) from multilateral agencies against sovereign guarantees of the Government of India,” IPPAI said in its letter written earlier this week to the power secretary.

The industry body pointed out that in view of the dominant position of Power Grid reflected in its predatory bid pricing, the ministry should ensure that the low-cost pool of funds raised by the company are not allowed to cross-subsidise tariff-based competitive bidding projects.

The IPPAI also sought separation of the central transmission utility role of Power Grid from its role as an asset developer to create a level playing field for competition and ensure delivery of the cheapest cost of landed power to consumers.

It claimed that Power Grid often gets projects on a nomination basis under Section 62 (cost plus) of the Electricity Act 2003 and is allowed a pass through of any cost escalation which is incurred due to any delays in projects.

However, it said that the projects competitively bid under Section 63 (which are primarily done by private sector transmission companies) are imposed with stiff penalties by the regulators for delays.

According to IPPAI, Power Grid beats the competition by quoting low prices due to diversion of funds from the parent company to special purpose vehicles at a very low carrying cost since these funds, which are from multilateral agencies, are lent under the sovereign guarantee of the Government of India.

Besides, it is able to divert resources from projects being built under Section 62 to projects under Section 63 without fear of loss since any delays or carrying costs in projects under Section 62 are allowed as a pass through, it added.

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