Impact of e-reverse auction on tariffs of ISTS schemes: A T&D India study
- July 11, 2025
Here is an exclusive T&D India study attempting to understand the impact of e-reverse auction on tariffs as evinced in a sample of 25 recent interstate transmission system (ISTS) schemes.
The study is based on 25 ISTS schemes awarded under the tariff-based competitive bidding (TBCB) route where information on tariffs (annual transmission charges) was officially released during the period January 1, 2025 to June 30, 2025.
The key finding is that the e-reverse auction (e-RA) has resulted in a 17 per cent overall reduction in tariff.
How it works
In a typical case, bidders are named L1, L2, L3, etc, in terms of their initial price bids. Thereafter, the e-reverse auction (e-RA) process is initiated at the end of which bidders are once again ranked on the basis of their final bids. The bidder emerging L1 at the end of the e-RA is named as the winning bidder.
During the various rounds of the e-RA, there is a gradual drop in bidders’ quotes and this results in the final L1 quote lower than the initial L1 quote.
Monetary benefit of e-RA
In the context of this study, the overall final L1 quote was 17 per cent lower than the initial L1 quote, and it can be construed as the monetary benefit of using the e-RA procedure in conjunction with the TBCB philosophy.
In value terms, the aggregate initial tariff of the 25 schemes under study was around Rs.173,706 million and the aggregate final tariff was Rs.144,127 million, implying a drop of 17 per cent.
Put differently, if the e-RA process were absent and schemes were awarded based on the initial L1 price bids alone, the overall transmission tariffs would have been 20.5 per cent higher than what they are with the e-RA process. This is perhaps a better way to quantify the impact of e-RA on final tariffs realized. [Rs.173,706 million (without e-RA) is 20.5 per cent higher than Rs.144,127 million (with e-RA)]
Cases of no e-RA
Of the 25 cases, no e-RA was seen in the case of two. One of these was the celebrated “Rajasthan Part I Power Transmission Ltd”– the first-ever HVDC scheme awarded to a private sector entity under the TBCB framework. (Read T&D India’s story dated June 3, 2025 for more details.)
In an overwhelming majority of cases, the e-RA procedure is conducted. However, there are incidents when no bidder participates in the e-RA and as such, the process does not get initiated. This happens when there is a significant difference between the L1 bid and the remaining (L2, L3, etc) bids in the initial round. The e-RA process kicks in only when a bidder (other than L1) tries to better the L1 bid. When the L2,L3, etc bids are significantly higher, bidders refrain from participation and the initial L1 bid ultimately becomes the final winning bid, without the e-RA process stepping in.
L1 in initial and final rounds
It is interesting to note that in the 25 schemes under study, in the case of 14 schemes the L1 bidder in the initial round turned out to be the ultimate winner in the final round (post e-RA). In the remaining 11 schemes, the final winner was not L1 in the initial round. It is further interesting to note that in each of these 11 cases, it was always a contest between PGCIL and a private developer. (There was no instance when a private developer was L1 in the initial round and the project was ultimately won by another private developer.) In these 11 cases, PGCIL emerged final winner in seven and a private developer, in the remaining four.
If a bidder is not L1 in the initial round but ends up winning the project, it is evident that the bidder will better his quotes more aggressively during the e-RA. This is evinced by the observation that the average final L1 bid in the aforementioned 11 cases was 24.6 per cent lower than the average initial L1 bid. On the other hand, in the 14 cases where the final winner was L1 in the initial round also, the comparable metric was much lower at 8.3 per cent. The average drop in tariff considering all the 25 cases was 17 per cent as discussed above.
Aggressive bidding
The average number of bidding rounds in the e-RA procedure was around 85, and ranged from 20 to as high as 180. It may be noted that out of the 25 schemes under study, the e-RA was conducted in 23 instances but information on the number of bidding rounds was available only for 12. Higher number of bidding rounds in the e-RA routine is suggestive of aggressive bidding, and this typically manifests in significantly lower final L1 bids when compared to the initial L1 bids.
A case in point is “Banaskantha Transco Ltd” – a scheme that was finally awarded to PGCIL. There were as many as 180 rounds of bidding during the e-RA routine with the initial L1 bid, at Rs.307.45 million, falling by nearly 37 per cent to finally close at Rs.195.22 million at the end of the e-RA. Interestingly, PGCIL was L1 even based on initial price bids, and the 180 bidding rounds during the e-RA was a contest just between PGCIL and a new private sector entrant. For the record, the e-RA process lasted two days – beginning on February 19, 2025 and ending on February 21, 2025.
Featured photograph is for representation only