Yet another report of a Task force headed by Planning Commission member BK Chaturvedi seems to be in trouble. The report of a task force headed by Mr Chaturvedi on operationalising open access has invited opposition from various corners including finance and power ministries . Former cabinet secretary and Petrolium ministry secretary BK Chaturvedi is notoriously known for many recommendations against public interest, mostly favouring corporates. Chaturvedi recently headed a government panel, which, in early August 2008, suggested ways to reduce the government’s oil subsidy bill that included upward monthly revisions of fuel prices. The recommendations have not found favour either with the oil ministry or public in general.
In its report, the task force has suggested amendment to Electricity Act 2003 to make it explicit that power supply by a generating company to a distribution licensee includes supply through an electricity trader. It has also suggested pricing cap and trading margins for inter-state trading of electricity.
The task force has also suggested maximum trading margin to be allowed to a single trader. In yet another contentious recommendation, the task force has suggested that the government should allow release of Accelerated Power Development and Reforms Programme (APDRP) assistance to states that enable consumers to exercise their right to open access. The power ministry has opposed this as the revised APDRP has already been approved by the Cabinet.
The Task force had suggested to promote open access. Under the new system, sale price for open access consumers would be determined by bidding and not by regulatory commissions. The task force has suggested that central PSU power companies should be allowed to reserve up to 50% of their unallocated quota for sale to open access consumers. Besides, the task force has said that 25% of Centre’s discretionary allocation of 15% of CPSU generating capacity may be made available for direct sale by such utilities to open access consumers.
In order to ensure that such sale is priced competitively, the task force has suggested that prices for sale to open access consumers should be determined by bidding. States would also be compensated from open access operations as CPSUs would have to share their profits accruing from such sales. This would eliminate the need for a separate cross subsidy surcharge and additional wheeling charges imposed by states that push up the price of open access sales.The task force has also recommended that the Centre should not allow states to sell supplies from unallocated central quota of CPSUs to other deficit states at prices exceeding the tariff finalised by the regulator. It has said that states who do not conform to this, should not be allocated any power from the unallocated quota and electricity thus saved could be diverted to other states.
The power and finance ministries have raised strong objection to inclusion of power trading within the purview of new open access regime proposed by the high-level task force and has sought its deletion from the report. This, they feel, would tinker with existing regulations on trading and affect investment flows in the power sector that requires over Rs 10 lakh crore over the Eleventh Plan period. The report of the task force is expected to be considered by an empowered sub-committee of the committee on infrastructure (under the Planning Commission) by next week.
“The task force was mandated to suggest ways of operationalising open access in a big way. It has gone beyond the mandate and suggested not only policy interventions but regulatory and system changes requiring amendment to the Electricity Act, 2003 and changes in the tariff policy,” a power ministry official said. The power ministry believes that the Act is comprehensive enough to deal with subjects like power trading, requirement of price caps, trading margin and the task force has no role to play here, he added.
The power ministry has sought deletion of the chapter on unregulated prices in the report. “No doubt trading will be difficult without open access but both are exclusive and substantially different activities,” the official added. In their letters to Chaturvedi, officials in the department of economic affairs (DEA) and power ministries have said that any changes in regulations on trading would severely impact the evolving power market and drive away both investments for want of more consistent policies.
The other members of the Task Force include power secretary Anil Razdan, former finance secretary D Subba Rao, principal advisor to Planning Commission deputy chairman Gajendra Haldea and CEA chairman Rakesh Nath. The report has already been considered by an empowered panel of the committee on infrastructure.