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PIL issued against Punjab government's power generation policy
A PIL against Punjab Government's decision to follow MOU route in place of competitive bidding for award of construction of thermal plants has been admitted by Punjab and Haryana High Court.
CJ: V K Gupta

Wed, Apr 27, 2011

PUNJAB AND Haryana High court on Tuesday issued notices to Punjab Government on a Public Interest Petition seeking striking down of state governments impugned generation policy 2010.

According to petitioner, Sukhninder Singh, the state government abandoned the policy of competitive bidding process for award of new thermal projects to the lowest bidder and adopted an opposite approach under the impugned generation policy 2010 which was issued on June 21. Under this policy any developer can set up a thermal project in Punjab through the Memorandum of Understanding (MOU) route where the tariff is to be decided by the PSERC under cost plus approach.

The generation policy further allows for setting up of extension units to existing projects earlier awarded under competitive bidding where by the state of Punjab would get only 15 per cent power from the extension unit while 85 per cent of power would be sold by the developer.

Memorandum of Understanding (MOU) for 660 MW extension unit at Talwandi Sabo was signed on October 4 and for 700 MW extension unit at Rajpura was signed on July 28 under provision of impugned policy.

It was also mentioned that PSERC had conveyed its objections to the impugned policy to Punjab Government on September 17, 2010 - affirming that through competitive bidding, lower tariffs have been achieved and that the competitive bidding procedure should be retained.

Earlier, Punjab Government awarded 1980 MW Talwandi Sabo thermal project to the lowest bidder at a rate of Rs 2.86 per unit. This rate was approved by the Punjab State Electricity Regulatory Commission. Similarly, competitive bidding was carried out for 1320 MW Rajpura Thermal Project which was awarded to the lowest bidder at a rate of Rs 2.89 per unit and the rate was approved by the PSERC.

As per calculations of CERC, in case of the 1980 MW Talwandi Sabo thermal project, the competitive bid rate is lower by 21.07 paise per unit resulting in a saving of Rs 25.9 crore per month. In case of Rajpura, the competitive bid rate is 59.22 paise per unit lower and would result in a saving of Rs 51.4 crore per month.

The petitioner also contended that the CERC carried out an analysis of the competitive bid tariff of 14 thermal projects and compared this tariff with the tariff that would have been admissible had the cost plus approach. The CERC study established that in 12 out of the 14 projects, the competitive bid tariff was substantially lower as compared to the calculated tariff.

The tariff policy of Government of India has statutory value under section 3 of Electricity Act 2003; the generation policy of Punjab is not issued under any provision of Electricity Act 2003.

The provision of tariff policy for competitive bidding, supported by calculations of CERC establish that under the MOU route (cost plus approach) adopted by government of Punjab, it would result in costlier power from new projects to be setup under this policy, which is thus not in the public interest.

The petitioner has demanded that since the impugned policy that cannot be implemented within the frame work of Electricity Act 2003, it is required to be struck down. Also, it would result in costlier power to the consumer.