India adopts new policy for power sector reforms

India adopts new policy for power sector reforms

power sector

Power and new and renewable energy minister Raj Kumar Singh has envisioned a larger agenda to reform India’s power sector.

This will be supplemented with  economic growth which has decelerated to a three-year low of 5.7% in the June quarter of 2017-18.

This comes at a time when states are reneging on their off-take commitments for projects.

Also, with states unwilling to buy electricity, no new power purchase agreements (PPAs) are being inked, contributing to the uncertain outlook for the Indian power sector.

“We are going to change the law to provide that those PPAs are enforced. We are going to provide for PPAs to cover 100% of the annual average demand of a particular state or a discom,” Singh added.

The proposed regulation will also provide for interest payment in the event of electricity generators’ dues not being cleared in time.

The government’s strategy is aimed at improving India’s per capita power consumption of 1,010 kilowatt hour (kWh) which is among the lowest in the world.

In comparison, China has a per capita consumption of around 4,000 kWh, with developed nations averaging around 15,000kWh per capita.

Last week Singh also talked about a radical plan to separate the so-called carriage and content operations of existing power distribution companies.

Carriage refers to the distribution aspect and content to electricity itself. In industry parlance, these are known as “wire” and “supply”.

The separation will allow people and companies in India buy electricity from a power company of their choice, and have it supplied to them by the distribution network that services the neighbourhood in which they live.

The result, apart from choice for consumers, would be lower tariffs because of the competition.

Any such proposed changes will require amendments in the Electricity Act of 2003.

The government plans to move the legislative changes in the next session of the Parliament.

This comes at a time when the centre and states are working for electricity tariff slab rationalization to make them uniform across the country.

This will help in reduction of cross-subsidies borne by the industry, and make tariffs more competitive for businesses thereby pushing the government’s ‘Make in India’ drive.

With an eye on better targeting of subsidies, the government is also exploring the use of direct benefits transfer (DBT) scheme in the electricity sector.

Government’s policy think-tank Niti Aayog has pitched for DBT in the electricity sector with its draft national energy policy.

With inputs from: Livemint

Image link : Internet sources