As if the already high power tariffs prevailing in India were not enough, the Central Electricity Authority (CEA) has now recommended that the power ministry require distribution companies (DISCOM) to make a certain percentage of their power purchases from hydroelectric projects. Discoms already have a renewable purchase obligation under current guidelines.- The central agency has opined that such a dispensation is required to boost hydropower development in the country, which faces tough competition from the less-expensive thermal power, when it comes to long term offtake agreements.
- According to CEA, discoms prefer executing power purchase agreements (PPA) with thermal projects, which have a higher certainty of being completed and at an earlier date, coupled with lower tariffs.
- Moreover, with the execution of the ambitious Ultra Mega Thermal Power Projects, it may be difficult for hydro projects, especially those located in the North Eastern region and Sikkim, to compete with thermal projects in terms of power tariffs, taking into account the higher transmission cost.
- Further, hydro projects are designed for low load factor in comparison to thermal projects, which makes its tariff costlier at least in the initial years, CEA points out.
- Citing similar concerns, the task force on hydropower development, constituted by the Ministry of Power (MoP), has already recommended that the cost-plus tariff regime be extended for the hydro sector for another five years, till January 2016.
- Pertinently, as per the National Tariff Policy, 2006, competitive bidding was supposed to replace the existing MoU regimen by January 2011, unless the apex regulatory authority deems the country not ready for such a transition.
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