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Home News Power Sector News Economic survey 2016 - Thumbs up for reforms, poser on tariffs

Economic survey 2016 - Thumbs up for reforms, poser on tariffs

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Economic surveyTill now, only six states have signed up for the Ujwal DISCOM Assurance Yojana (Uday) to turnaround their power distribution. These are Bihar, Uttar Pradesh, Rajasthan, Jharkhand, Chhattisgarh and Gujarat. The Economic Survey 2016, presented on Friday, however, tagged the Uday scheme as one that will introduce sweeping changes in the sector, under a new chapter: 'Powering One India'.

Pet schemes of the ruling National Democratic Alliance - Deen Dayal Upadhyaya Gram Jyoti Yojana for electrification of villages, Integrated Power Development Scheme, the LED distribution program, and a five-fold increase of renewable energy targets - also found mention in the Economic Survey.

However, the Survey also noted the complexity of the tariff structure in the country, and industries succumbing to self-generation - diesel gensets in 47 per cent of the cases.

"Tariffs for the poor can be reduced while covering costs and without unduly burdening those better off," said the Survey.

High tariffs and erratic supply for industries have led to a slow but steady decline in the growth of industrial electricity purchases from utilities and a gradual transition towards captive generation. Hence, the Survey advised open access across the country to ensure one market for power and seamless electricity generation and distribution.

Rajesh K Mediratta, director, business development, Indian Energy Exchange, said, "The Survey has captured very well the concerns of the industry, which finds itself constrained by not having access to cheaper power from the market."

The Open Access (OA) policy introduced under the Electricity Act, 2003, allows consumers with electricity load above one megawatt to procure electricity directly from electricity markets.

At its core, OA provides an aggregation of the countrywide supply and demand on the same platform. Therefore, this constitutes a first step towards discovering a single market price for power around the country, said the Survey.

"Very few people outside the industry realise that tariff and non-tariff barriers have retarded government efforts on Make in India. Costlier power has caused irreparable loss to the industry by making it uncompetitive with respect to imports. Market access is a fundamental right according to Electricity Act, 2003," said Mediratta.

The Survey also noted there is, at present, no specific policy guidelines on the intra-category cross-subsidisation or subsidy provisioning. It said the new paradigm of surplus power sets the stage for continuing these reforms so that India can become "one market" in power.

The Economic Survey further explains that the burden on industry can be relieved, allowing it to become internationally competitive as envisaged in Make in India.

"All states need to make the best use of this surplus situation to rationalise cross-subsidy surcharge and also revisit the temporary charge rate applicable in case default supply from discoms is availed by any open access consumer. The high temporary charge deters prospective consumers from availing cheap power under open access, which affects their competitiveness," said Power Exchange of India Managing Director and Chief Executive Officer M G Raoot.

The Survey said the tariffs can be made simple and transparent, avoiding proliferating end-use charges; and by taking advantage of the possibility of greater progressivity in rate-setting, charges for the poor could be reduced while generating more revenues.

"In all of this, the state governments and the state regulators will have a key role to play, with helpful facilitation from the Centre. The power sector is a perfect crucible for making effective the cooperative-competitive federalism experiment that is now India," said Survey.

"It's the right time to implement Section 49 of the Electricity Act, 2003, which allows all open access consumers to purchase electricity competitively. This measure would ensure that cheap resources like hydel power is utilised for meeting demand energy requirements from the subsidised category and the large-load consumers are free to procure power competitively," said Raoot.

Source- Business Standard


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