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Reverse auction for short term power procurement to reduce power tarif

In ICRA's view, implementation of e-bidding with reverse auction for short term power procurement will bring down power tariffs by a paltry 4-5 paise per unit. It would benefit both discoms and their end consumers. Procurement through such mode would result in a competitive price discovery in a more transparent manner. "We expect average traded bilateral price levels on all India basis to moderate by about 50-60 paise per unit, which implies a decline by about 13% over the prevailing bilateral traded price level", said Sabyasachi Majumdar, senior vice president, ICRABSE -0.58 % Ratings.

The power ministry, has recently notified amended guidelines for procurement of power by distribution utilities on short term basis for a year through a competitive bidding. Effective April 1, 2016, such procurement by discoms shall be on an electronic platform based reverse auction system. Under assumption of cost-plus tariffs for discoms and a 10.5% share of short-term traded power in the total procurement mix, average retail supply tariff is expected to ease by about 4-5 paise per unit for end consumers on a national basis. Discoms with relatively higher dependence on short term power, especially in south, could benefit even higher believes ICRA. "While reverse auction based procurement of short term power is beneficial for discoms, in our view it is a negative for power