When it comes to path-breaking reforms in the power sector, one aspect that readily comes to mind is the tariff-based competitive bidding (TBCB) mechanism. Right from conventional power generation to power transmission and now to renewable energy like solar and wind, the TBCB philosophy has resulted in a drastic reduction in power tariffs, which has been in the ultimate interest of the consumer.
When it comes to interregional transmission lines, Power Grid Corporation of India was always the sole implementing agency. Matters changed in January 2011 with the advent of the TBCB mechanism. PGCIL now had to compete with other contenders and the project was awarded on the basis of tariff quoted. This has resulted in overall efficiency—lower capital costs, faster gestation period, faster returns on investment and of course, lower tariff for the ultimate consumer.
However, there are instances where PGCIL is awarded a project directly when the power ministry feels, for a variety of reasons, that the project is not amenable to the TBCB mechanism. This could happen if the project involves too much technical complexity or needs to be completed within a compressed time schedule. What is beginning to be a cause for concern is that there are growing instances of such projects being awarded to PGCIL, under what is called the regulated tariff mechanism (RTM). Under this mode, the tariff is fixed upfront. This tariff is not discovered through a bidding process but negotiated. Invariably, this tariff ends up being higher than what would have been the case if TBCB were employed.
The Empowered Committee on Power Transmission, now known as the “National Committee on Transmission” is the authority that decides, among other things, the modalities of building power transmission systems, based on recommendations of the regional standing committees. NCT is chaired by the Chairman of Central Electricity Authority (CEA) and its membership includes officials of CEA, the Union power ministry, Niti Aayog and two independent power experts. What is intriguing is that one PGCIL official is also a part of the committee. Furthermore, of the two power experts, one is a retired official of PGCIL, in the current composition of NCT.
The presence of PGCIL in the NCT is questionable. How can PGCIL be part of a committee that decides on matters where PGCIL is a potential beneficiary? This point has generated substantial debate, and quite justifiably so.
In the first meeting of NCT that was held on July 27, 2018 and whose minutes were recently made public, an overwhelming number of projects were awarded to PGCIL under the RTM philosophy. This allotment may be fair but as long as PGCIL is part of NCT, there will always be a lurking element of bias.
Whatever militates against the TBCB mechanism ultimately works against the competitive spirit in the power sector. The TBCB philosophy, and nothing else, has brought unprecedented efficiency in the power sector; every effort must be made to uphold and support it.
The author of this article, Venugopal Pillai, is Editor, T&D India. Views expressed here are personal. The author may be reached at venugopal.pillai@tndindia.com