Abstract
The Government of India liberalized its economy in 1991, opening up the power sector to private participation. The existing Central Electricity Authority guidelines for Independent Power Producers (IPPs) are analyzed to obtain the net price of power and the internal rate of return for coal and combined-cycle natural gas power plants, under different assumptions of input parameters. The results show rates of return higher than the nominal 16%. An uncertainty analysis reveals the relative importance of various parameters. Problems with the existing guidelines are shown, providing insights for policy changes. Adoption of modified guidelines for IPPs which are more transparent are likely to result in more affordable tariffs, less delays and yet provide adequate rates of return for investors.
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