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Tariff-based competitive bidding on

Tariff-based competitive bidding on

The mandatory competitive tariff-based bidding for thermal power plants and transmission systems from 5 January, has brought a major change in power sector. All power projects had to shift to a tariff-based competitive bidding regime and all PSU’s had to compete with private firms for supplying electricity.


The decision taken by a Group of Ministers on power sector issues effectively disallowed future generation and transmission projects to enter into power purchase agreements (PPAs) based on the former ‘cost-plus’, regulator-determined tariffs. The move was initiated in order to bring in transparency in the award of projects and drive down tariffs. The only exceptions, where the continuation of the ‘cost-plus’ tariff has been allowed, are the expansion of already commissioned projects and multipurpose hydro projects. Specifically, it is Clause 5.1 of the Tariff Policy that provides that all future procurement of power by distribution utilities should be done through tariff-based competitive bidding.

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