After having been forced to scrap bidding for two proposed ultra mega power projects (UMPPs) in Odisha and Tamilnadu earlier this year due to poor response from bidders, the Government is having a rethink on whether the standard bid document should be remodelled on the BOO (build-own-operate) model, which entails ownership of the project to the successful bidder for its entire duration.
Soon after the bidding for Odisha and Tamilnadu UMPPs was scrapped by the Power Ministry, it formed a five-member panel headed by former Central Vigilance Commissioner Pratyush Sinha, to look into the entire bidding process afresh. The other members of the panel included Pramod Deo (ex-CERC Chairman) and R N Choubey, Special Secretary in the Ministry of Power. This panel, according to sources, is likely to submit its report this month itself and in all likelihood the BOO model may be recalled.
The reason why the bidding for the two UMPPs failed was because the Power Ministry recently had changed the bid document and made it suitable to the Design-Build-Finance-Operate-Transfer (DBFOT) model where the ownership of the project after the expiry of its contractual life, gets shifted to the state where it is located, sources privy to the development said.
They added that earlier the bid document was based on the BOO model, where the successful bidder gets to retain the project for its entire life. This format was also favoured by the companies bidding for the UMPPs.
Sources said that the panel is learnt to have seriously looked at the possibility of modifying the standard bid document on the basis of the BOO model. The need for modifying the bidding process for UMPPs also gains significance in the aftermath of Reliance Power earlier this week withdrawing from Tilaiya UMPP, citing delay in land acquisition by Jharkhand Government even more than five years after the pact for the project was inked.
Once the panel submits its report to the Power Ministry, it will be sent for Cabinet approval. UMPP is a coal-based power project with 4,000 mega watt generation capacity. The Government is bullish on setting up UMPPs and therefore the setback faced by Tilaiya UMPP would have hit it hard.
In this context, it would like to put the setback behind and make the terms and conditions of bidding for UMPPs, more investor-friendly. Finance Minister Arun Jaitley in his Budget speech had said that five more UMPPs under the plug and play model would be set up with total investments of Rs 1 lakh crore.
Meanwhile when the Government had invited bids for the two UMPPs in January this year, the Odisha UMPP had attracted nine interested bidders, including Adani Power, ClP India, GMR Energy, Jindal Steel and Power, JSW Energy and Sterlite Energy.
After the private companies pulled out, only NTPC and NHPC were left for bidding. For the Tamil Nadu UMPP, the private companies in the fray were Adani Power, ClP India, Jindal Steel & power, JSW Energy, Sterlite Energy and Tata Power. Of these, four bought the Request for Proposal (RFP) document but decided not to go ahead further.