Increasing tariff should not be considered as a reform
Updated: Aug 01, 2013 06:44:38pm
New Delhi, Aug 1 (KNN) In view of the woes consistently haunting the power sector, a review should be made quarterly and checked to see if the policy and implementation process is working efficiently or not, said former Minister of Power, Government of India Suresh Prabhu.
“Increasing tariff should not be considered as a reform, instead efforts should be made to increase the efficiency of operations and reducing transmission and distribution losses,” he said, speaking at FICCI’s National Conference titled, ‘10 Years of The Electricity Act, 2003: A Critical Review.’
Referring to the Electricity Act 2003, he said the Act had not failed although the lack of implementation and inaction had resulted in dismal outcomes.
The state governments, he said, could not possible provide the required USD 60-70 billion that power sector needed each year. The private sector would only invest if the sector is bankable and viable.
While calling for private sector participation on a larger scale, Prabhu said, the central and state governments need to find ways to collaborate to make the process of implementation smooth.
Meanwhile, Chairman, Energy Infratech Pvt Ltd and former Secretary, Power, Government of India, R V Shahi said that the Electricity Act must be looked at considering the other statutory policies such as policy instruments, tariff and electricity policy and rural electrification policy.
When the policy review was undertaken, the transmission sector had shown a mixed performance according to him. While distribution reforms were partially successful, performance of rural electrification had been disappointing and the tariff situation was grave. Further, the mismatch in fuel supply was a major cause of concern.
The Coal Bill, Shahi said has been pending in the Parliament for the last 12 years and that could be one of the reasons for the current situation of the sector. He urged the sector to explore other alternatives while considering their implications.
On the other hand, CEO, AF - Mercados EMI Private Limited, Anish De said that while the power regulatory framework was of international standards and provided a great deal of independence and flexibility to regulators, the state level regulators have had to struggle to balance the needs of the customers and the utilities, and force through operational, financial and pricing efficiencies.
He said that at the state level, institutions have been weak, leading to ineffective implementation of regulatory objectives. However, the mechanism according to him is well entrenched in the Indian power system, and needs to be equipped with the tools and capabilities to execute the mandate more effectively than at present.
De attributed the poor show at the state level to the condition of the distribution companies. The poor financial state of the distribution utilities provided very limited latitude to the regulators to act on the issues of significance, whether those related to the utilities' internal operations (efficiency, tariffs, supply standards, etc) or external aspects (market development, promotion of renewables, etc).
Distribution utilities he said, considered all measures to be hostile to their financial health except for tariffs. Further, regulators were wary of tariff revisions without commensurate improvements in efficiency and service standards, even when such revisions were for causes external to the utility.
As a result, they are now forced to raise tariffs by external agencies such as the Appellate Tribunal or RBI.
Others present during the inauguration of FICCI’s National Conference on ‘10 Years of The Electricity Act, 2003: A Critical Review’ were Minister of State for Power Jyotiraditya Scindia, President, FICCI, Naina Lal Kidwai, Managing Director and CEO, Jindal Power Limited and Chairman, FICCI Power Committee, R S Sharma. (KNN/ES)
feedback: newsdesk@knnindia.co.in
“Increasing tariff should not be considered as a reform, instead efforts should be made to increase the efficiency of operations and reducing transmission and distribution losses,” he said, speaking at FICCI’s National Conference titled, ‘10 Years of The Electricity Act, 2003: A Critical Review.’
Referring to the Electricity Act 2003, he said the Act had not failed although the lack of implementation and inaction had resulted in dismal outcomes.
The state governments, he said, could not possible provide the required USD 60-70 billion that power sector needed each year. The private sector would only invest if the sector is bankable and viable.
While calling for private sector participation on a larger scale, Prabhu said, the central and state governments need to find ways to collaborate to make the process of implementation smooth.
Meanwhile, Chairman, Energy Infratech Pvt Ltd and former Secretary, Power, Government of India, R V Shahi said that the Electricity Act must be looked at considering the other statutory policies such as policy instruments, tariff and electricity policy and rural electrification policy.
When the policy review was undertaken, the transmission sector had shown a mixed performance according to him. While distribution reforms were partially successful, performance of rural electrification had been disappointing and the tariff situation was grave. Further, the mismatch in fuel supply was a major cause of concern.
The Coal Bill, Shahi said has been pending in the Parliament for the last 12 years and that could be one of the reasons for the current situation of the sector. He urged the sector to explore other alternatives while considering their implications.
On the other hand, CEO, AF - Mercados EMI Private Limited, Anish De said that while the power regulatory framework was of international standards and provided a great deal of independence and flexibility to regulators, the state level regulators have had to struggle to balance the needs of the customers and the utilities, and force through operational, financial and pricing efficiencies.
He said that at the state level, institutions have been weak, leading to ineffective implementation of regulatory objectives. However, the mechanism according to him is well entrenched in the Indian power system, and needs to be equipped with the tools and capabilities to execute the mandate more effectively than at present.
De attributed the poor show at the state level to the condition of the distribution companies. The poor financial state of the distribution utilities provided very limited latitude to the regulators to act on the issues of significance, whether those related to the utilities' internal operations (efficiency, tariffs, supply standards, etc) or external aspects (market development, promotion of renewables, etc).
Distribution utilities he said, considered all measures to be hostile to their financial health except for tariffs. Further, regulators were wary of tariff revisions without commensurate improvements in efficiency and service standards, even when such revisions were for causes external to the utility.
As a result, they are now forced to raise tariffs by external agencies such as the Appellate Tribunal or RBI.
Others present during the inauguration of FICCI’s National Conference on ‘10 Years of The Electricity Act, 2003: A Critical Review’ were Minister of State for Power Jyotiraditya Scindia, President, FICCI, Naina Lal Kidwai, Managing Director and CEO, Jindal Power Limited and Chairman, FICCI Power Committee, R S Sharma. (KNN/ES)
feedback: newsdesk@knnindia.co.in
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