States Oppose Clause On Pvt Distribution

Some state governments have raised objections to the central government's mega-power project policy wherein the Power Trading Corporation (PTC) will supply power to cities with a population of more than one million (10 lakh) only if power distribution is done by a private operator.

At a recent meeting held between state governments and the Union power ministry, states like Kerala and Tamil Nadu have expressed unhappiness over this clause in the mega-power project policy.

Sources said the Centre was considering the state governments' points, but had not arrived at any decision on amending the policy.

As power distribution is a state subject, states have expressed that such a clause will virtually force state governments to privatise their power distribution.

States like Kerala have decided not to privatise their power distribution and instead have decided to undertake financial structuring of the electricity board.

Tamil Nadu, on the other hand, is also planning not to privatise its power distribution but is yet to come out with any concrete plan on the restructuring plans of the electricity board. Tamil Nadu, as a policy, is one of the few states that does not charge any tariff to the agricultural sector.

Other states like Andhra Pradesh, Rajasthan, Haryana and Orissa _ which are following the World Bank model of power sector reforms _ have not objected to this clause. Under the World Bank package, 51 per cent state government stake in each of the distribution zones has to be offered to the private sector.

Apart from the condition of privatising power distribution, the Centre has also laid down additional conditions whereby beneficiary states will require to a regulatory commission in place with power to fix tariffs as envisaged by the Central Act.

Under the mega power policy _ power projects with a capacity of over 1,000 mw will be selling power to more than one state through the PTC. Incentives such as import of equipment free of customs duty, 15 per cent price preference and deemed export benefit for domestic bidders would also be provided to the promoters of these projects.

The government targets to add capacity around 80,000 mw over the next 12 years. The government through the mega power policy initially plans to add around 7,000 mw coal based and 5,200 mw gas based projects to be set up by the National Thermal Power Corporation. In addition the National Hydro Power Corporation plans around 3,100 mw, while the private sector would add 9,500 mw using the domestic and imported coal.