Coping with Demand: MoP invites bids for procuring 4,500 MW of power under SHAKTI

MoP invites bids for procuring 4,500 MW of power under SHAKTI

To help states cope with the rising po­wer demand and resolve the stress in the sector, the Ministry of Power (MoP) has launched a scheme for the pro­­curement of 4,500 MW of po­wer for five years under Scheme to Har­ne­ss and Allocate Koyla Transpa­re­n­­tly in India (SHAKTI). Under the sche­me, PFC Con­su­l­ting has invited bids for the supply of 4,500 MW of po­w­er on a competitive ba­sis through public-private partnership to utilities in Delhi, Maha­rash­tra, Madhya Prade­sh, Gu­jarat and Tamil Nadu.

Background of SHAKTI

To recall, the SHAKTI policy was launch­ed in 2017 to phase out the earlier letter of assurance- and fuel supply agreement-based regime, and introduce a more transparent and competitive coal allocation policy. The policy was amended in March 2019 to aid stressed projects ba­sed on the recommendations of a high-level empowered committee. The am­endment allowed coal linkages to power plants, which either did not have power purchase agreements (PPAs) or whose PPAs had been terminated due to a payment default by discoms.

Based on Ministry of Coal data, several linkages have been granted under various provisions of the scheme, as of April 2022. Under Clause B(i), linkages have been granted to 29 thermal power plants for a total capacity of 29,300 MW. Under Clause B(ii), the first auction (for IPPs that have PPAs based on domestic coal) was conducted in September 2017, whereby 27.18 million tonnes per an­n­um (mtpa) of annual coal linkage was booked by 10 bidders for 9,044 MW of capacity. In the second round, conducted in May 2019, 2.97 mtpa of coal linkages were booked by eight bidders for about 874.9 MW of capacity. In the third round, an auction was held in May 2020 and 2.8 mtpa linkages were booked by five bidders. The fourth round of linkage auction was conducted in September 2021 and 3.2 mtpa linkages were booked by five successful bidders.

Under Clause B (iii), auctions were conducted for independent power producers without PPAs in Febru­ary 2020. Out of the total offer of 11.8 mtpa, 6.48 mtpa was booked by se­ven successful bidders. Un­der Clause B (viii)(a), nine tranches of lin­kage auctions has been conducted. Out of the total offered quantity of 48.28 million tonnes (mt) of coal, 14.23 mt have been booked. Under Shakti B (iv), coal linkages have been granted from Coal India Limited to Gujarat, Uttar Pra­desh and Madhya Pradesh for a capacity of 4,000 MW, 1,600 MW and 2,640 MW re­spectively, to be allocated through competitive bidding.

Procurement of power under new provisions

It is for the first time that bids have been invited on a finance-own-operate ba­sis, and bidding is being carried out under Clause B (v). As per Para B (v), the power requirement of the group of states can be aggregated and the procurement of such aggregated power can be undertaken by an agency on the basis of tariff-based bidding. Earlier, in October 2022, the MoP had notified the guidelines for the procurement of power for the same. The methodology for coal allocation as per the provisions of Para B (v) was in­troduced in May 2022.

Under the scheme, the supply of electricity will commence from April 2023. The Ministry of Coal has been requested to allocate around 27 mtpa for this scheme. The last date for bid submission was December 21, 2022. After completing the bidding procedure, the letter of award for the supply of power will be given in January 2023.

The date of commencement of power supply under the contract will be not less than 120 days for a medium-term contract and not less than 1,460 days for a long-term contract. Also, a revised PPA for the medium term is being used in this bidding. Further, the base fixed ch­ar­ge and the base variable charge spe­cified in the bid would be at least 35 per cent of the quoted tariff.

Expected impact

Five utilities have expressed interest in procuring as much as 3,910 MW under the scheme. These are Gujarat Urja Vikas Nigam Limited (1,000 MW), Maharash­tra State Electricity Distribution Compa­ny Limited (500 MW), Madhya Pradesh Power Management Company Limited (660 MW), the New Delhi Municipal Cor­po­ra­tion (250 MW) and Tamil Nadu Gene­ra­tion and Distribution Corpora­tion Limited (1,500 MW).

Earlier, in 2022, the country witnessed a demand surge coupled with supply sh­ortage. Power demand increased to 216 GW in April 2022 from 183 GW in April 2021, a sharp rise of 23 per cent. This could not be met and a shortage of 4 per cent ensued. The energy requirement in April 2022 stood at 135 BUs (up from 117 BUs in April 2021, a rise of 15 per cent), with a shortage of 2 per cent. In view of this, the scheme is being seen as a welcome move for addressing po­wer supply needs and improving power procurement by the states.