According to the report, the negative bid is a positive for the sector as the plants are no longer dependent on the government subsidy.
At the third round of reverse e-auction to avail subsidy to buy imported re-gasified LNG, the price bids entered the negative zone of Rs 0.03/kwh. The negative bid involves reverse bidding for the subsidy amount to come from the power system development fund (PSDF).
A zero bid indicates the power producers wish to take no subsidy while a negative bid entails the companies would pay a premium to the government in return.
Though the negative bid is a positive for the sector, these bids have already priced in that the concessions provided to the stakeholders due to waiver of customs duty, VAT, CST, service tax and octroi as well as reduction in market margins and pipeline tariffs, will remain.
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Also, the tariff being paid by discoms at Rs 4.7/kwh is still higher than the cost at which they can buy short-term power from exchanges, the report said.
In the first phase of auctions for the period June- September 2015, the same was Rs 1.74/kwh.
In the current auction, nine plants with a cumulative capacity of 5,942 MW were allotted 7.62 mscmd compared with the auctioned 8.9 mmscmd, which reflects that some developers perceived higher risk in this round and hence refrained from participation.
Assuming crude prices to stay at USD 40 a barrel in the
In the third round of auctions, the generators have to supply power at or below Rs 4.7/kwh to discoms. Even assuming that most of the generators have signed PPAs at Rs 4.7/kwh, net realisation will be Rs 4.67/kwh due to negative bids.
The current auction will help generate an additional 6.79 billion kwh, which will be supplied to the purchaser discoms from April-September 30, 2016, he said.