Railways to procure power through competitive bidding; save ₹3,000 cr

Railway Minister Suresh Prabhu plans to save ₹3,000 crore in sourcing electricity by proposing to procure power through competitive bidding.

In the Rail Budget, Prabhu said that to bring down the cost of electricity, the Railways will now procure power through a competitive bidding process to get favourable tariff from generating companies, power exchanges, and bilateral agreements.

“To improve the operating ratio we have also looked at expenditure and this is why we want to revamp our power procurement,” said Prabhu.

At present, the Railways’ annual requirement of electricity is around 18 billion units a year, which it sources at around ₹8 per unit. Its peak requirement is around 4,000 MW, said Prabhu at an industry event after the Budget.

“Even if the Railway sources 20 per cent or around 800 MW of power from exchanges, the target of ₹3,000 crore of savings over the next five years can easily be met,” said RK Mendiratta, Director (Business Development), Indian Energy Exchange.

He added, “Railways has a lot of variable electricity requirement apart from its fixed requirement. Here, sourcing from power exchanges at spot rates would make sense.”

Till now NTPC has been supplying around 100 MW annually to the Indian Railways. Earlier in February, the railways completed its first bilateral power purchase agreement with Damodar Valley Corporation to buy 50 MW.

Prabhu also announced the plan to set up 1,000 MW solar power plants at Railway lands and rooftops of railway buildings with support from the Ministry of New and Renewable Energy over the next five years.

While solar power manufacturers welcomed the announcement, many expected a clear roadmap of details.

“Unfortunately we have heard many Railway Ministers talk of the intention of setting up solar plants but till now just one project has come up. With the kind of announcements we have seen at Re-Invest 2015, the Railways’ plan is dwarfed,” said a senior officer at a Greater Noida-based solar panel manufacturer.

For the energy sector, Prabhu has also proposed setting up of joint ventures and special purpose vehicles with State governments to facilitate the evacuation of coal from the mine to the end-users.