The Union ministry of power is working on formulating a policy to attract greater private investment into power distribution.
Under the policy being worked out, the government would consider introducing incentives linked to operational parameters in power distribution and raising the ceiling on profits to attracting investors.
The government is considering the legal and policy implications of the issues in hand.
The study would also point out whether this would require to be cleared by the Parliament as a bill or can be done through a notification.
According to power secretary, E A S Sarma, privatisation of distribution would help in tiding over the problem of state electricity boards (SEBs) providing escrow account cover as well as guarantees from the government.
The present Electricity Supply (Act) puts a cap on the profits that a licensee can earn and does not allow them to earn any profit exceeding five per cent over the RBI bank rate.
