While all fingers point to the country’s coal producers for any power crisis India faces, it is also a fact that the efforts being made on the policy front are not trickling down to the last mile. What could be the reason for this? And why green energy still hasn’t fully become a part of the ecosystem?

According to those who produce coal, there was an impression that renewables will come up in a big way and help offset coal usage. But this has not happened so far.

Coal cannot be dismissed entirely from the system, as it is the one that meets the base load; wind and solar are still unreliable. Base load is the amount of power made available by any energy producer, such as a power plant, to meet the basic demands of consumers.

It is a fact that both the Power Ministry and the Ministry for New and Renewable Energy are playing an active role in shaping the policies to meet the green commitments made by India. But there is some ground to be covered in the area of implementation.

And here are some of the areas that require attention: (a) the sector is weighed down by the absence of clear regulations and procedures from regulatory bodies, especially the State regulators; (b) Discoms often take a divergent stand in matters of change-in-law and passthrough; and (c) delays in tariff /quantum adoption.

According to producers of green energy, this is primarily due to the different focus of the government and the regulators — while the former focusses on growth, the latter largely follow a conservative route.

Then should one say that there is a disconnect between producers and policymakers. There is certainly some scope for enhancing interactions between investors/producers and policymakers, especially for framing of policy and announcements; often policy/notifications come as a surprise.

For a highly regulated sector like power there is hardly any scope of gaming, only advance deliberations will help in smoothening the process, said an observer.

Any meaningful time-frame for deliberations with the industry prior to issuance of common policies is always welcome, industry players aver. For example, the recently issued rules for late payment surcharge are not being accepted by State governments and are being challenged in courts.

Therefore, prior consultations with State and other stakeholders would be beneficial for actual implementation of such notified rules. Even with repetitive interventions, power procurement receivables have been increasing, and now stand at around ₹1.07-lakh crore.

What is the way out?

A need for de-licensing of downstream distribution activity and segregation of carriage and supply business can certainly bring in efficiency into the power market. But, more importantly, honouring of international contracts and obligations by States needs to be ensured. This will also help boost investor confidence.

The energy sector has been grappling with the never ending problem of outstanding dues, which has led to financial stress across the electricity chain.

On May 25, the Power Ministry said that the inability of Discoms to pay dues impacts the entire value chain of the power sector, and considering this situation it is working on a scheme to mitigate the financial woes of the Discoms.

The proposed scheme enables payment of financial dues in easy instalments by the Discoms; they will be given the flexibility to pay the outstanding amount in up to 48 instalments. Also, a one-time relaxation is being considered for all the Discoms.

The liquidation of outstanding dues in a deferred manner without imposition of the Late Payment Surcharge (LPS) will give Discoms time to shore up their finances. At the same time, the generating company will benefit from assured monthly payments which otherwise were not forthcoming. However, in case of delay in payment of an instalment by a Discom, the otherwise exempt LPS shall be payable on the entire outstanding dues.

The LPS is levied on the payment outstanding by a Discom to a generating company at the base rate (pegged to SBI’s Marginal Cost of Lending Rate). The LPS is applicable for the period of default at base rate for the first month of default and increases by 0.5 per cent for every successive month of delay, subject to a maximum of 3 per cent over the base rate at any time.

Spot market

While the government is dealing with these issues, there is another aspect that needs attention. Although much of the power market in India is free, there is small quantum of power still being procured from the spot market whose price is determined based on market dynamics. Such market enabled procurement gives an option to Discoms to fulfil their unplanned purchases.

Recently though, a cap has been placed on the exchange prices in the spot market. This could hamper development of merchant capacity in the country, argues a section of the industry.

Some of the enablers for development of renewable capacity in the country must include notifying the bid pipeline for solar/wind/hybrid capacity and elimination of reverse auction methodology under RE bidding, according to active players in the sector.

Considering the challenges that the power sector continues to face, a lot of political will both at the Central and State levels is required to completely overhaul the sector and make it robust

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