POCKET PINCH

New Delhi, Nov. 25: The performance guarantee in mega power projects has been raised by 50 per cent for developers who have already bagged one such project.

If the developer has two projects under its belt, the guarantee will be raised by 100 per cent. The decision was taken by the group of ministers on mega power projects following a recommendation by a parliamentary standing committee which wanted to ensure the financial capability of developers to handle more than one project.

This implies a guarantee of Rs 450 crore for the second project and Rs 600 crore for the third compared with a guarantee of Rs 300 crore for the first project. Such a move is likely to impact the bidding process for the Tilaiya mega power project in Jharkhand which will have a capacity of 4,000 mega watt.

It could lead to Reliance Power and Tata Power quoting a higher tariff because they would have to factor in the higher guarantee in their costs.

Tata Power bagged the Mundra project in Gujarat, which will run on imported coal, by quoting a tariff of Rs 2.26 per unit.

Reliance Power won the rights to develop the Sasan project in Madhya Pradesh which will run on pit-head based coal with a quote of Rs 1.19 per unit.

For the Krishnapatnam project in Andhra Pradesh, Reliance Power is the lowest bidder with a quote of Rs 2.33 per unit.

Analysts feel the decision will help prevent a monopoly situation but puts companies such as Reliance Power and Tata Power at a disadvantage. Officials favouring the decision said there was enough opportunity in power beyond the mega projects.

They said such a guarantee would ensure the seriousness of bidders in developing multiple projects.

However, there is a possibility of affected entities challenging the decision of the ministers.

Since the move has a prospective effect, Reliance Power’s Sasan project will not be affected, nor will the company have to make any changes in the tariff for the Krishnapatnam project where it has emerged as the lowest bidder.

The decision of the ministers will have an impact on the bidding process for the Tilaiya project, for which 13 firms have placed bids. These a re being scrutinised by the nodal agency for mega power projects, Power Finance Corporation.