Consensus sought on power reforms

The cabinet has asked the power ministry to restart consultations with stakeholders on the Tariff Policy and National Electricity Policy.

The ministry, which placed several key recommendations of the N K. Singh task force on power sector investments before the cabinet yesterday, was asked to renew consultations in light of opposition from key stakeholders to its provisions.

The power ministry has been under fire from stakeholders including the regulators, state governments and Central utilities for having processed the recommendations of the N K Singh panel at record speed without adequate consultation.

The panel had been entrusted with the task of providing suggestions for the government's Tariff Policy among its terms of references.

Power minister, Anant G Geete had earlier shown reluctance to push these proposals for clearance by the Cabinet in a hurry, and had even assured several states and utilities including Power Grid Corporation Ltd that some of the controversial provisions would be dropped from the policy.

The note that was placed before the Cabinet, however, contained all the original provisions of the N K Singh panel, including several of those being disputed by stakeholders, sources said.

Andhra Pradesh chief minister Chandrababu Naidu, Central Electricity Regulatory Commission (CERC) chairman A K Basu, National Thermal Power Corporation chairman and managing director C P Jain are among those who had written to the government against the provisions of the task force recommendations.

The recommendations included fixing the post-tax return on equity at 14 per cent for power generation companies and at 16 per cent for distribution companies, raising the depreciation rates for utilities to 5.6 per cent from the current 3.6 per cent of the fixed assets, and abolition of the development surcharge which state-owned power generating companies are allowed to levy and restructure NTPC into five independent generating companies.

Going beyond the N K Singh committee's recommendations, the power ministry note for the Cabinet suggested that the post-tax return on equity for distribution companies be raised from 16 per cent to 19 per cent, subject to their achieving higher reduction in transmission and distribution losses.

Post-tax return on equity for the private generating companies was also proposed to be cut from the present 16 per cent to 14 per cent.

The government had set up the task force, headed by Planning Commission member N K Singh in August 2003 to address various issues of power sector reforms.

The task force's members included S. Narayan, economic advisor to PM, revenue secretary, Vineeta Rai, CEA chairman, HL Bajaj and former UPERC chairman, JL Bajaj.