With an intention to give potential developers more flexibility in deciding the location and fuel for the plant, government is planning to do away with variable cost as a criteria in bidding for new power projects. At present power projects are awarded through two routes, which are popularly known as Case I and Case II models. Under the Case I, developers have the choice to decide on location, fuel and technology to be used for the plant, while these parameters are fixed by the government for the Case II projects. The government is now working on changes to the standard bidding norms for Case I projects for which it has had discussions with stakeholders. The government has reportedly finalized new bidding norms too and the same would be presented to the Inter Ministerial Group (IMG) by end of this month.
It is leant from reliable sources that the proposed norms provide for single bidding parameter of “fixed charge”, which includes capital costs in awarding Case I projects. At present, such projects are awarded to developers through bidding after taking into account two key aspects — non-escalable (fixed) and escalable (indexed) components. The escalable or variable costs are mostly related to fuel charges. If the new norms are adopted it would help the developers protect themselves from the fluctuation in fuel prices which of late have become volatile.