Power panel for sops to state projects

The N K Singh Committee on power reforms has suggested the criterion that allows inter-state projects to avail of fiscal benefits under the mega power policy be extended to intra-state projects.

In its reference on market dominance, the panel has asked the government to consider the proposal of establishing regional generating companies from the present stations of the state-owned National Thermal Power Corporation (NTPC) to foster competition.

According to NTPC officials, the task force's suggestion of hiving off NTPC stations is futuristic and is not likely to be considered now since the onus on capacity addition is on state-owned utilities such as NTPC.

With reference to inter-state projects, the task force report has said, "Given the provisions of the Electricity Act 2003, such as freedom of choice and open access, it may be possible for mega power projects to find customers within one particular state."

It has suggested that the mega power policy be amended to exclude the criterion, which requires that such projects supply power to more than one state.

Thus, state projects can also avail of fiscal benefits reserved only for inter-state power projects. The panel has suggested a 14 per cent return on equity (RoE) in generation and transmission projects and has proposed a higher 16 per cent return on distribution projects.

The panel has suggested the adoption of a 70:30 debt-equity ratio, with lower equity to be considered at actual levels. It has also suggested that depreciation rates be re-aligned with the Companies Act 1956.

The panel has said power procurement should preferably take place through a tariff-based bidding mechanism. It has said the operating tariffs should be at normative levels. The task force has said the Central Electricity Authority (CEA) should evolve operating norms, which is presently being done by regulators.

The panel also said more pit head power stations will be required for the efficient use of natural resources with the need for harnessing hydro potential to a greater extent. A robust national grid will be required for this purpose, the panel has said.

In the case of distribution, the committee has said the transition financing requirement for the turnaround of the distribution sector needs to be firmed up in state-specific business plans to be prepared in consultation between the SEB and the respective SERC.

The panel has said the ongoing Accelerated Power Development and Reforms Programme (APDRP) scheme should close out new sanctions beyond the aggregate level of Rs 10,000 crore and the scheme be restructured by redirecting money towards transition financing after agreement between the Centre and the respective state.

The report has said transmission tariffs should be set taking into account the distance and direction factors and should be related to power flows. This will address the pancaking of networks to a great extent and promote open access.

To promote robust transmission system for open access, the task force has suggested prior arrangements should not be a pre-condition for the expansion of central and state utilities.

A two-part tariff structure has been recommended for transmission featuring capacity-based access charges and energy-based user charges for utilising the grid.

CERC and state commissions have been asked to evolve a common framework of flows across all assets to be priced as per a common transmission tariff.

The task force has favoured allowing distribution companies to charge tariffs below the levels approved by regulators alongside the introduction of time-of-the-day tariffs. The panel has advised state governments for introduction of multi-year tariffs for a five-year period, starting April 2005.