Key reforms in power sector stuck as elections draw near

Siddhartha P Saikia New Delhi | Updated on March 12, 2014

Power play Some of the crucial issues facing the power sector areamendments to the Electricity Act, revival package for gas-starved plantsand reviving the Dabhol plant.

Ministry yet to decide on seeking EC nod to go-ahead with pending issues

Some very important decisions that were crucial for the power sector now face uncertainty and would be delayed since the model code of conduct for General Elections has come into force.

Some of the key issues in the pipeline include amendments to the Electricity Act, revival package for gas-starved power plants and options for reviving the stranded Dabhol power station.

The Ministry has circulated notes for seeking approval from Cabinet for all these issues. The inter-ministerial reviews are under consideration. However, the Ministry is not sure whether the decisions can be taken.

“The Ministry is yet to decide if it would seek Election Commission of India (EC) approval to take up the issues with the Cabinet. It may take few more weeks to arrive on the decision,” a senior Power Ministry official told Business Line.

The Ministry was planning to seek Cabinet approval for sourcing gas for fuel-starved power projects and had proposed ₹6,000 crore subsidy for distribution utilities (Discoms). The subsidy would have helped Discoms to buy expensive electricity produced from imported gas without burdening the consumer with higher tariff.

Moreover, several Discoms are yet to file their application for new tariffs.

Delhi, Haryana and Maharashtra have announced lowering of consumer tariffs by increasing subsidy. With elections round the corner, States will not be keen on hiking tariffs.

India Ratings & Research has assigned a stable to negative outlook to the power sector, given pending policy level issues, manifestation of risks undertaken in earlier years, mismatch in coal demand and supply and continued tariff pressures. Despite this, electricity growth is likely to be in the range of 5-6.5 per cent year-on-year in 2014-15.

“In case the States’ distribution utilities are not allowed cost-reflective tariffs and/or receive subsidies in a timely fashion, specially the States which have implemented a financial restructuring package (FRP), it could jeopardise the entire power sector value chain again. The economics of subsidies and tariff would, however, be different for each State,” said Salil Garg, Director (Corporates), India Ratings & Research.

Published on March 12, 2014

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