Supreme Court admits govt plea on competitive bidding

Raising hopes for cheap power in future for consumers, the Supreme Court on 04-07-2011, admitted the Centre's plea to make electricity generating companies follow the competitive bidding process for allocation of distribution rights. At present, the generating companies have been signing power purchase agreements (PPAs) with distributing firms at a rate that has not been tested by market forces and considered to be on the higher side entailing consumers to pay more than what is due to the discoms.

The Centre moved the court challenging an order of the Appellate Tribunal for Electricity, which had upheld the legality of an MoU signed between Maithon Power Ltd and Tata owned discom NDPL. It was signed without following the competitive bidding process.

A bench comprising Chief Justice S H Kapadia and Justices K S Radhakrishnan and Swatanter Kumar said: "This is a very important issue which ultimately affects the consumers at large. We straightaway admit the appeal."

The court admitted the appeal after hearing additional solicitor general Mohan Parasaran, senior counsels A M Singhvi and U U Lalit, who represented the Centre, NDPL and Maithon Power Ltd respectively.

"There is reluctance on the part of the power generators not to adopt competitive bidding but to go for MoU which will derail and delay the progress of power sector reform and availability of cheaper power to the ultimate consumers in the society and also increase the possibility of favouritism," said the Centre in its appeal.

The government said, "It is pertinent to submit that if competitive bidding route is adopted the rate would be very reasonable and profiteering could be restricted and ultimately the consumers will be benefited."

It said: "The competitive bidding process for the power purchase agreement should be followed as it brings down the tariff rates benefiting the consumers at large."

Maithon Power Ltd and NDPL had signed the PPA on April 30, 2009. It was signed without the generator company following the bidding process. It was upheld by the Tribunal in its order passed on March 31, 2010.

"Such route adopted for the mega power projects have brought the competitive rates very low. They were Rs 1.196 per kw/h for Sasan power project in MP, Rs 2.264 per kw/h for Mundra power project in Gujarat, Rs 2.33 per kw/h for Krishnapatnam project and Rs 1.77 per kw/h for Tilaiya power project," it said.