States have been asked to furnish their comments for the ongoing review of the National Electricity Policy to bring it in line with proposed changes in the Electricity Act 2003 and the National Tariff Policy, both of which are in the process of being amended.
The existing Electricity Policy was notified by the Centre in 2005. The panel tasked with the review has recently written to states' energy secretaries, reminding them to share their comments on the existing policy and inputs for changes. A key amendment proposed by the government is meant for separating the power supply business from ownership of the distribution network.
The idea is to allow multiple players to supply electricity in the same distribution area by using open access route and encourage competition in the power market to the benefit of consumers. Open access provisions of the Act allow consumers with more than 1 mw of load to take power supply from wherever they want, provided they pay wheeling charges and cross-subsidy surcharge to the local distribution company.
However, these provisions are not being implemented by power distribution companies who fear losing well-paying commercial and industrial consumers. Currently, state utilities have monopoly over both power supply and distribution network. Hence the Centres attempt to encourage competition in power distribution through implementation of open access provisions is being resisted by utilities that fear losing well-paying electricity consumers.
The move may prove a game changer for Indias power distribution sector which is dominated by state-owned entities. Debt-ridden power distribution companies were given a Rs 1.93 lakh crore lifeline by the Centre in 2012 to help them recast their outstanding loans. Half of the discoms loans were shifted to state governments balance sheets and a three year moratorium was allowed for repayment of the balance loans. But after the moratorium period ended this March, discoms are facing difficulties in repaying debts.
The NDA government, which has envisaged 24X7 electricity supply by 2018-19, fears that the discoms financial woes could derail its plan. So, the government has decided to restore financial health of discoms.Sources said the Centre is preparing a Cabinet Note to provide relief to discoms reeling under debt burden which is estimated to have reached Rs 4.43 lakh crore. When the financial package is implemented, states can take over the balance debts of discoms which can start afresh with clean balance sheets.