Plan panel for power policy rejig

The power ministry should list the elements of the Electricity Act that are to be reviewed, says the mid-term appraisal of the Tenth Five-Year Plan, adding that this will help remove uncertainty among potential investors.

"These should address the concerns raised without undermining investor confidence or weakening the drive to create a competitive and efficient power sector," says the final version of the document.

The Left parties had raised certain issues, pertaining to elimination of cross subsidies, unbundling of state electricity boards and differentiation between urban and rural areas, and called for a review of the Act.

Negotiations have been on between them and the government since January, but there has been no clear outcome. The appraisal also calls for a tariff policy, after full consultations with the Planning Commission and the finance ministry, by June 2005.

After this, the Central Electricity Regulatory Commission should be asked to undertake a review of the tariff orders issued by various state electricity regulatory commissions (SERCs) to determine the extent to which they are in conformity with the tariff policy, it says.

The tariff policy will establish the basic framework within which investors will work. Among other things, it will have to address critical issues such as the manner of setting the cross subsidy surcharge.

The mid-term appraisal also says that the tariff policy should require SERCs to allow open access in a phased manner instead of waiting for the outer limit of January 2009 set for the entire country.

Open access provision will enable bulk consumers to access power from generating companies on payment of a wheeling charge and cross subsidy surcharge to be set by the regulator. This is expected to encourage private investment in power generation.

The Electricity Act requires open access to be introduced for all users of 1 Mw and above, no later than January 2009. SERCs are required to issue regulations by June 2005.

Drawing up a six-month plan for the power sector, the appraisal says that the situation in the sector is worrisome, primarily because of the very slow pace of progress in the distribution segment.

"Without effective reforms in this area, the sector will not be financially viable and will be unable to achieve the required levels of public investment or to attract private investment," it says.

The Accelerated Power Development and Reform Programme should be restructured to link it to incentives for improving distribution, especially reduction in transmission and distribution losses, the appraisal says.