Even returns in power mooted

NK Singh panel favours 14% return on equity

The N K Singh task force on the power sector has recommended a flat 14 per cent rate of return for both state-owned and private power companies, a higher rate of depreciation for power utilities, and a 70:30 debt-equity ratio.

The task force, which was set up after several states opposed the provisions of a draft tariff policy floated by the power ministry last August, submitted its second report to the government on Tuesday.

The task force has recommended a 14 per cent return on equity (RoE) for both private projects and central utilities, including NTPC and NHPC, against the RoE of 16 per cent for private projects and 14 per cent for central utilities suggested by the Central Electricity Regulatory Commission (CERC).

"This will put private utilities at an obvious disadvantage as the central power utilities have recourse to securitisation to settle outstandings, while private projects do not come under the securitisation scheme," a representative of a private power utility said.

If the depreciation norms for power projects are re-aligned with the provisions of the Companies Act, the cost of power for the consumer could go up.

The Act provides for a depreciation of 5.2 per cent, against the 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.

The panel has prescribed a debt:equity ratio of 70:30, in line with the normative debt:equity ratio proposed by the CERC in its draft terms.

The panel has also suggested that the two-part structure in place for calculating generation tariffs should be replicated in the transmission sector and that operating norms for power companies should be worked out by the Central Electricity Authority.