Indian industry feeling Modi govt heat? Move on competitive advantage to PSU power cos

By Rajiv Shah
Has the Indian industry begun to come off its shell, beginning to see that something is fundamentally wrong, detrimental to its interests, with policies adopted by the Government of India (GoI)? It would see so, if the latest move by the Association of Power Producers (APP), is any indication.
APP, significantly, is the apex body of the country’s top industrial houses, ranging from Adani and Tata to Reliance (Anil Ambani) and Torrent, all of them so far considered pro-Narendra Modi, and involved in power generation.
In a strongly-worded letter to Union minister for power and new & renewable energy Raj Kumar Singh, APP director-general Ashok Khurana has said that the GoI has come with a “very regressive provision” in order to protect state-sector power generating stations from competition by seeking to “reintroducing the cost-plus regime”.
Calling it “discriminatory”, the APP letter warned, the proposed amendment to the Tariff Policy 2016 would have “wide-ranging impact on investments in power Sector, especially in generation segment”, pointing out, it would mean that “now only private generators would be subjected to competition.”
The Tariff Policy, 2006 had stipulated all future requirement of power were to be procured through competitive bidding, even as providing an exemption to the public sector projects for five years, i.e. till January 2011. The five-year moratorium was particularly advantageous to the National Thermal Power Corporation (NTPC), the Central public sector undertaking (PSU), which has a generating capacity of 53,651 MW.
While NTPC sought the extension of the timeline in 2010, the APP letter noted, “it was as not agreed by the Central Electricity Regulatory Commission (CERC)”, which argued, on the basis of an analysis of NTPC’s 14 projects, that, thanks to the cost plus regime, their tariffs were “significantly lower than regulated tariffs”. The Tariff Policy 2016, as a result, “kept the Central sector generating stations out of the cost-plus regime.”
APP said, “In the last of 8-9 years, all other components of the cost of supply (controlled by government monopolies) have increased by 13% to 300%, while the cost of generation, where private sector contributed significantly during the 11th and 12th plan period (2007 onwards, when UPA was in power) has come down by 21% due to enhanced efficiency of the private sector developers.”
It added, “Despite the fact that cost-plus regime has not led to reasonable and competitive rates, it is surprising that, contrary to the advice of CERC, the Ministry of Power is again proposing to reintroduce this regressive provision.”
Pointing out that “the proposed provision discriminates on the ground of ownership – public vis-s-vis private – to allow public sector projects to enter into power purchase agreement (PPA) under cost plus regime”, the letter insisted, “The cardinal principle of public policy is that all stakeholders should be treated alike.”
Pointing out how NTPC, which is “yet to sign a single competitively bid project”, has already started avoiding competition by entering into joint ventures with states to remain under the cost plus regime”, the letter said, this has already distorted the “competitive landscape.”
In fact, it said, a piquant situation has arisen, where public sector power plants Sholapur and Barh Stage 2, with tariff at Rs 5.30 and Rs 5.68 per unit, respectively, have assured PPAs, whereas private-owned plants willing to sell power between Rs 3.00 and Rs 3.25 per unit are struggling for want of PPAs.

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