Electrification frameworks may go

Power ministry working on new, liberalised policy

The ministry of power is working on a new electrification policy under which nearly 75 per cent of the country is likely to be freed from regulatory frameworks.

Under the new policy which aims to speed up the rural electrification drive, any unit that has set up a generator and transmission networks in a declared rural area, can sell power at a market determined price.

A senior power ministry official said, "Once the policy comes into force, almost 75 per cent of the country can buy power outside the regulatory framework. Also, for the first time, we would be allowing a price discovery mechanism to operate in the power sector."

So far, all the power generated in the country is sold at prices pre-determined by the Central and state electricity regulatory commissions.

Under the new policy, which is expected to be finalised by the next week, states have to declare designated rural areas where these privately managed or franchisee projects will be allowed to come up.

These projects can be anything from micro-hydel to bio-mass, wind energy or diesel-based projects. Explaining the proposal, the official said, "If there are 20 small generators in an area and each one generates 100 kw, under the new policy, they can come together to put up a 2 mw generation unit and sell power to consumers who want to buy it at a price determined by the market. They can set up generation units and their own transmission networks for distribution.

These franchisees will be entirely free from the regulatory framework in terms of both setting up the power plants, as well as for transmitting and selling power. So, if a company is setting up a factory in a designated rural area, it can generate power for its own use, as well as sell the same to other users nearby."

He added companies like GE and Kirloskar have shown interest in setting up small generator-based units to supply power to agricultural customers in states such as MP, Punjab and Haryana.

The official added, "There is no way that the price of power generated by these units will be steep, as people will not buy if it is too costly, simply because somebody else can set up another project and sell at a cheaper rate."

Already, around 18 states had agreed to declare designated rural areas where such networks can be set up. The rest, he said will have to follow soon, to avail the funding available under the scheme.

Under the Rajiv Gandhi Grameen Vidhyutikaran Yojana, the government plans to invest around Rs 15,000-16,000 crore in rural electrification projects.

The official said the funding for individual franchisees under the policy can also be made available through the Power Finance Corporation. The process, he said would involve setting up a registered company which would take the loan on its balance sheet.