States oppose power tariff report

The provisions of the N K Singh task force report on the power sector have met with stiff resistance from stakeholders, including state governments and power sector regulatory bodies.

Andhra Pradesh Chief Minister Chandrababu Naidu has already written to Union Power Minister Anant Geete saying no formal consultation with state governments on the draft policy has taken place.

"The task force report appears to be a watered down version of the government's draft tariff policy circulated last August, with specific financial norms spelt out only in case of return on equity (RoE) norms, debt:equity ratio of utilities and depreciation norms against financial norms stipulated in the case of almost all parameters in the Centre's earlier draft. By specifying the financial norms, the policy steps into the regulatory domain," an official with a power regulatory commission said.

The Centre was forced to refer the tariff policy to the task force primarily because stakeholders, including state governments and regulators, were opposed to almost all the provisions, a state government official said.

"Several states are planning to issue protests against the manner in which the Centre is trying to push the policy through without adequate consultation on specific issues," the state government representative said.

The task force was entrusted with providing suggestions for the Centre's tariff policy following stiff opposition from several states and power sector regulators to the provisions of the draft tariff policy floated by the power ministry last August, which they termed was too intrusive and specific.

According to state government officials, if the depreciation norms for power projects are re-aligned with the provisions of the Companies Act 1956, as suggested by the task force, the cost of power for the consumer can go up.

The Companies Act provides for a depreciation of 5.2 per cent, against a rate of 3.5 per cent allowed to utilities, at present.

Since the incidence of depreciation is pass through, any increase in the rate will have to be borne by the consumer.

Private sector utilities have also voiced their opposition to the recommendation for a flat 14 per cent return on equity (RoE) for both private and Central generation projects, saying it will put private utilities at a disadvantage.

The draft policy circulated by the ministry in August last year had specified numbers in case of almost all parameters, resulting in opposition from the regulatory establishment who said the policy intruded into their jurisdiction.