Power sector reforms coming soon, says Minister RK Singh; see what is in offing

The government is planning to introduce major changes in various segments in the power sector such as power purchase agreement (PPA) requirement, renewable purchase obligation (RPO) norms and cross-subsidy tariff structure. Inaugurating the ‘ASSOCHAM Global Investors’ India Forum’ here on Thursday, power minister RK Singh said that in the forthcoming meeting of energy ministers of all states on November 10-11, he is going to announce that ‘all discoms must have PPAs to cover 100% of requirement’. Currently, states buy power from the electricity exchanges at spot market rates to cater to power requirements beyond PPA capacities. Singh also said that that there has to be a limit to cross-subsidisation in tariff to make the industry competitive enough. To compensate lower agricultural power tariffs, electricity rates for industrial and commercial customers can go as high as Rs 8/unit to Rs 13/unit in some states. The minister also spoke about introducing Direct Benefit Transfer (DBT) in the power sector.

As FE reported earlier, the government is looking at options to initiate measures and pilot projects in states to introduce the DBT mechanism for power consumers to meet the twin goals of curbing wasteful consumption and efficiently delivering subsidy. The draft national energy policy, published by the NITI Aayog in June, had noted that adoption of DBT would protect the vulnerable electricity customers from rise in electricity prices when fuel costs go up. The minister said that he plans to make amendments in the Electricity Act, 2003, to introduce a penalty provision for utilities who do not meet their RPO targets.

To achieve the target of achieving 175 GW renewable energy capacity by FY22, the power ministry in July, 2016 had issued guidelines for long-term RPO trajectory for a three-year period from FY17 to FY19. The minimum RPO target was set at 11.50% for FY17, 14.25% in FY18 and to 17% in FY19. RPO is the share of the total energy that is to be procured from renewable energy sources. State discoms can meet RPOs by buying renewable energy through PPAs and by purchasing renewable energy certificates. The union minister further said that his ministry will separate carriage and content. Separating carriage and content would segregate distribution grid from distribution of electricity, effectively allowing end consumers to choose where they want to buy electricity from— something similar to current telephone or television connection system.

Source- The Financial Express