MoP Recommends Adoption of Tariff Based Competitive Bidding for Intra-State Transmission Projects

Ministry of Power requests the state governments to adopt tariff-based competitive bidding to develop intrastate transmission systems.

In a notification issued by the Ministry of Power (MoP) dated 15th March 2021, it says that as intra-state transmission systems has a major share in the transmission sector in the country, adoption of Tariff Based Competitive Bidding (TBCB) in development of intra-state transmission system can effectively reduce burden on State Government’s finances as well as reduce tariff of intra-state transmission system, leading to consumers’ benefit.

The Central Government had notified its revised tariff policy in January 2016, and according to that:

• Investment by transmission developer including the central transmission utility and state transmission utilities, would be invited through competitive bids per the central government’s guidelines from time to time.
• While all future inter-state transmission projects should, ordinarily, be developed through a competitive bidding process, the central government may give exemption from competitive bidding for a specific category of projects of strategic importance and works required to be done to cater to an urgent situation on a case-to-case basis.

With adoption of TBCB for the development of transmission systems, the following benefits were observed:

• Lower Tariff compared to Cost Plus: With a large number of bidders participating in the development of a transmission project, the discovered tariff can be lower than the cost-plus tariff by about 30-40%.
• Less Burden on Government Finances: It attracts private investments to develop projects, and the government funds can be used for other priority sectors.
• Risk Sharing: It encourages the use of advanced technology for improving cost and efficiency. A cost-plus tariff is where the developer is paid the actual cost of the project plus an agreed profit.