A panel headed by Housing Development Finance CorporationBSE -0.22 % chairman Deepak Parekh has suggested that the government help developers of stranded power projects, attract private investments in coal mining and allow large consumers to buy power directly from producers, as part of its recommendations on reviving investment in infrastructure.
According to the high-level committee, the power sector presents the most complex of all challenges facing the economy. It estimated that distribution companies make a loss of about Rs 1 on every unit of electricity supplied to consumers.
This leads to power cuts as they try to reduce losses.
"The committee believes that unless the market structure is changed by moving from monopoly supplies to competitive supplies of electricity, which is consistent with the prevailing industry structure in developed countries, the sector may continue to be unsustainable," the committee said. It also suggested viability-gap funding for private firms in distribution.
The committee was set up in 2010 by the then UPA government. It was initially headed by former central bank deputy governor Rakesh Mohan whom Parekh replaced in July 2012. The committee submitted an interim report in late 2012 and completed its latest report recently.
"In order to introduce healthy competition and to eliminate incumbent resistance from (staterun monopoly supplier) Coal India, the committee recommends setting up of a new public sector un dertaking to award and manage public-private-partnership concessions. The new company should be allocated mines which either have all the required clearances or are in advanced stage of getting such clearances," the report said.
The committee also recommended that the government transfer yet-to-be-explored mines of Coal India to the new company.
The committee said a shortage of coal has delayed a number of power-generation projects and this has led to defaults in debt servicing by developers.
The committee recommended constitution of a task force under the chairmanship of a deputy governor of the Reserve Bank of India with representatives from ministries of finance, power, coal and petroleum to suggest measures for restoring health of stranded power projects through suitable relief in debt service obligations.