There is no problem with the idea of a tariff policy from the central power ministry. The government has the right to outline the broad framework of policy within which the regulators should function as far as setting of power tariffs is concerned.
But what has irked the regulators is the tone of this draft, flowing from which are the detailed directions that have been given on the depreciation rates that need to be fixed for power projects, the rate of return on investment and many other aspects that should have been left to the regulators.
Two years ago, the power ministry had come out with another draft tariff policy. That document had only two and a half pages. Nor did that try to stipulate specific rates for depreciation, capacity utilisation or the rate of return on investment. It had 20 broad policy objectives and guidelines on how the regulators should decide on tariffs and returns on investment.
The two-page document was an outcome of several rounds of meetings held by the chairman of the group on tariff policy,
S Prabhakaharan, who was then special secretary in the power ministry. States and representatives of the private and public sector power producers were consulted before the ministry put out that draft.
Nobody knows where that draft has disappeared. It would have perhaps seen the light of day if Suresh Prabhu had retained his job as the power minister.
For Prabhu was very keen that the government should reduce its regulatory role and allow the central and state regulators to play a larger and more effective role on issues such as tariff fixation.
Prabhu was also conscious of the fact that there was a natural conflict of interest if the power ministry controlled tariffs and investment norms.
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
