GOVERNMENT OF INDIA
9th October, 1995
1.At the time the Private power policy was launched in 1991, the methodologies regarding independent power projects (IPP) had not totally crystallized. Therefore, like all other countries - developed and developing - the initial project solicitation was through the MOU route.
2. From the experience gained over the past three years, it is now possible to follow the bidding route for IPPs in the interest of transparency as well as to encourage competition, which would no doubt also help in getting a better deal for the State Electricity Boards (SEBs). We can resort to bidding route only when the State governments have undertaken an integrated resource planning exercise thereby enabling them to identify the system needs additional capacities required, the technical and environmental characteristics and the mode of despatch etc. The next stage would be preparation of feasibility reports and obtaining different clearances and linkages for the projects. Bidding route also requires that financing arrangements, PPA, legally enforceable FSA etc. are standardised and published.
3. The Minister for Power had written to all the Chief Ministers way back in October, 1993 that it is necessary to introduce competition by asking for price bids. I had also written to you in November, 1993 to fix a date beyond which SEBs would not offer any projects except through the bidding route.
4. We had also organised a number of workshops for State/SEB officers so that they could prepare scientific bidding documents. Notable among these workshops was the technical workshop on competitive bidding on private power organised with the help of the World Bank in Hyderabad in June'94 which was attended by a large number of State/SEB officials. In fact, some of the States like Andhra Pradesh, Maharashtra, Rajasthan and Haryana have finalised their latest batch of projects on a partial bidding route. We are again going to hold a training on "Bid Solicitation, Project Appraisal and Negotiation" in ASCI Hyderabad in January-February 1995 for the benefit of State/SEB officials. We hope that you would be nominating suitable candidates to take advantage of this training course as well.
5. In its effort to play the role of Development Financial Institution, PFC has established the Technical Assistance Project for Private Power Development - a US $ 20 million development soft loan with an interest rate of 12.5% and repayment period of 20 years including therein a moratorium of up to 5 years - with World Bank assistance. Services of experienced consultants for project preparation, preparation of pre- feasibility and feasibility reports, detailed project reports, bid preparation/evaluation, selection of Independent Power Producers, negotiation of Power Purchase and other related Agreement with the selected Independent Power Producers can be financed under this loan. The utilisation of such services could even save precious time in identification of various risks, analysis of the project proposals from financial and technical angles, ensure proper allocation of risks between the developer and the SEB, resulting in reasonable tariff for purchase of power and expeditious implementations of these projects (Please see Annexure).
6. The Ministry has now prepared a set of guidelines to assist the State Governments in following the bidding route, a copy of which is enclosed. We hope that these guidelines would be useful to you, while adopting the competitive bidding route. We have also decided that all future projects should come through the process of competitive bidding. In fact, the Central Electricity Authority is being asked not to entertain any future proposals which have not been processed through the procedure of competitive bidding. It is, however, recognised that the SEBs have already entered into numerous MOUs, the validities of which have not yet expired, and the SEBs might be at various stages of negotiation with the parties. Therefore, some time would need to be allowed to see the out come of these MOUs. However, this period should not be an indefinite period and it would be advisable to weed out the non-serious proposals and include those schemes on the competitive bidding process as well. We would like to receive suggestions from you regarding the period these MOUs should be permitted for achieving financial closure.
With best wishes,
Encl: As above To all Chief Secretaries of State Governments/UTs
REVISED DEADLINE FOR SUBMISSION OF DPR
9th October, 1995
We have been writing to the State Goats / Uts from time to time to weed out the non-serious private power proposals on the Memorandum of Understanding (MOU/Letter of Intent (LOI) etc., route. Following the state wise review meetings held in the
2. However, it needs to be emphasised again that the in- principle clearance granted by CEA is not under the provision of any Act but is only an administrative clearance. In-principle clearance is only to help the promoter to get different financial approvals from Indian / International Financial Institutions to enable him to prepare a detailed project report (DPR) which is put up by him to CEA for techno-economic clearance under section 29-30 of Electricity (Supply) Act, 1948.
3. With a view to ensuring that the momentum that has gathered up as a result of the continuous persuasion by the Ministry of Power and the active cooperation of the various Deptts / Agencies of the State Goats, there is a need to fix atime limit for all the projects that have been granted In-principle clearance of CEA for submission of DPRs with firm cost estimates for obtaining the techno-economic clearance of CEA. Accordingly, CEA is being advised not to entertain any proposal on the MOU/LOI etc., route for techno-economic clearance after 31.3.97. In addition, all the projects which have not yet finalised their EPC contracts should be required to go in for international competitive biddings (ICBs) in selection of their EPC contracts. In case of IPPs which inform that their EPC contract has been finalised, the State Electricity Board should satisfy itself that it is indeed so and in cases where it is not finalised, the State Electricity Boards should ensure that the ICB route adopted is transparent and proper.
4. I am sure that 9 months time is reasonable for the serious IPPs to do the needful for obtaining the techno-economic clearance of CEA. I shall be grateful if you could bring this decision of the Govt. to the notice of all the IPPs in your State and extend full assistance and cooperation in their obtaining the statutory/non-statutory clearances and linkages for fulfilling the requirements laid down by the CEA.
With best wishes,
All Chief Secretaries / Secretary (Energy) / Chairmen (SEBs).
REVISED DEADLINE FOR SUBMISSION OF DPR-2
1.Kindly refer to my D.O. letter No.4/1/96-IPC.II dated 28.6.96, wherein the dead-line of March 31, 1997 was set for all the Independent Power Producers (IPPs) on the Memorandum of Understanding (MoU)/Letter of Intend (LoI) , etc., route (costing more than Rs.100 crores) which had obtained the in-principle clearance of Central Electricity Authority (CEA), for filing the Detailed Project Reports (DPRs) with the Central Electricity Authority for obtaining techno-economic clearance.
2. We have been reviewing the progress of all the IPPs periodically in consultation with CEA and other concerned Departments / agencies. The Ministry of Power had also organised several meetings to review the progress of the IPPs and to facilitate their obtaining various critical inputs/ linkages.
3. We had earlier set a dead-line of March 31,1997 to complete some formalities. However, even though 9 month s time had been given to the IPPs for finalising their DPRs, very few have submitted their DPRs to CEA despite the issue of clear-cut guidelines for preparation of DPRs. The documents filed with CEA have been, invariably incomplete.
4. We have been receiving requests from several State Governments for extension of the dead-line. Though, on one hand, it is heartening to note that all the IPPs have taken serious steps to finalise their DPRs, the lack of interest on the part of some IPPs justifies the imposition of such dead-lines by the Government for weeding out non- serious proposals.
5. The liquid fuel allocation has recently been finalized, and some of the State Governments are still in the process of finalising and short listing the liquid fuel based IPPs. Some of the issues pertinent to hydro-electric IPPs will be crystallized when the Govt. takes a decision on the report of the Hydro-Committee set up under the Chairmanship of Shri M.K. Sambamurti.
6. Taking all the issues into consideration, it has been decided that further extension of the March 31, 1997 will be considered only in the following cases:
(A) Liquid Fuel Projects (a) The modalities for allocating liquid fuel for IPPs were finalised recently. A few States are still in the process of sending their project- wise recommendations. Naturally, these IPPs will not have enough time to prepare their DPRs, as firm fuel linkage and comfort of its availability are some of the inputs CEA considers for techno-economic clearance. Keeping this in view, the dead-line is extended by three months from the date of issue of provisional fuel linkage for all liquid fuel based projects.
(B) Hydro-electric Projects The main reasons for the delay in finalisation of DPRs for hydro-electric power projects, viz. completed cost of the project, geological surprises etc, already figure in the terms of reference of the Sambamurti Committee. In respect of hydro-electric power projects, the dead-line stands extended by 6 months from the date of Government's acceptance of the recommendations of the Sambamurti Committee.
(C) Coal Based Projects We have taken up the matter with the Ministry of Coal for granting an in-principle coal linkage/ allotment of a captive coal mine for the IPPs on the MoU/ LoI, etc. route which have obtained the in-principle clearance of CEA. Most of these are yet to be considered by the SLC (Long-term).It has been decided to extend the time-limit for submission of DPRs by the coal-based IPPs for a period of 6 months from the 31st March deadline.
(D) Expansion / co-generation schemes
The dead-line of 31st March, 1997 is not applicable to co-generation/ second-phase expansion projects, even if some of them have obtained the in-principle clearance of CEA.
7. In all these cases, extension of the dead-line will be considered only where it is supported by a recommendation of the State Govt.
8. I shall be grateful if you could render all possible co-operation and assistance from the State agencies to ensure that the IPPs meet the extended dead-line.
With best wishes,
To Chief Secretaries (All States)/Secretary (Energy) and Chairmen (SEBs)
Dr. E.A.S. Sarma
9th October, 1995
Please refer to D.O. letter of even number dated April 2, 1997 from Shri P. Abraham, former Secretary (Power), extending the dead-line of March 31, 1997 set for all the Independent Power Producers (IPPs) on the Memorandum of Understanding (MoU)/Letter of Intent (LoI), etc. route (costing more than Rs. 100 crores) which had obtained the in-principle' clearance of Central Electricity Authority (CEA) for obtaining techno-economic clearance.
2. We have been receiving requests from several State Governments and IPPs for extension of the dead-line in view of the inability of the IPPs to complete the requisite formalities for reasons beyond their control. The matter is also being continuously monitored by this Ministry in consultation with CEA.
3. It has been decided to extend the dead-line for filing of complete DPRs with CEA by all the proposed coal-based power projects in the private sector by another 6 months beyond the earlier prescribed dead-line of September 30, 1997. This would imply revision in the dead-line to 31-3-1998. In the case of the proposed liquid-fuel based power projects, complete DPRs are required to be furnished to CEA by December 31, 1997.
4. I shall be grateful if you could render all possible co-operation and assistance from the State Departments and agencies to ensure that the IPPs meet this extended dead-line so that the projects fructify at the earliest.
All Chief Secretaries/ Secretary (Energy)/ Chairman (SEBs)