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Thursday, December 2, 2010

MoP against continuation of cost-plus tariff regime for HEPs

Breaking rank with the Central Electricity Authority (CEA), the Ministry of Power (MoP) has been revealed to be against the continuation of the cost-plus tariff regime for the hydropower sector beyond January 2011. The MoP has questioned the arguments put forward by those favoring the extension of cost-plus tariffs. 

  • The ministry has pointed out that had HEPs been unviable in the free market, as claimed by the IPPs, the private companies would not have been paying substantial upfront premiums to grab such projects from avaricious state governments.
  • Interestingly, the ministry has put forward this line of reasoning, despite the fact that, both, the CEA and the ministry's Task Force on hydro project development have already recommended that the cost-plus tariff regime be extended for the entire hydro sector for another five years, till January 2016. 
  • As per the National Tariff Policy, 2006, competitive bidding is supposed to replace the existing MoU regimen by January 2011, unless the apex regulatory authority deems the country not ready for such a transition.
  • The private players are now expected to issue a riposte to the point raised by the power ministry.

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