States should take power subsidy burden: Scindia

The government is planning a peaking power policy

Union power minister Jyotiraditya Scindia today said state governments should take on the liability of power subsidies on their own budget and not burden the distribution companies.

He said the Centre did not have any problem with the states giving out subsidy so long it did not spoil the financial health of the companies.

Speaking at a Ficci event, Scindia said the government was using the financial restructuring package as a ‘carrot and stick’ policy with 50% of the liabilities would vest on the books of the banks and 50% on the balance sheets of states, unlike in the past when it was passed on to the books of distribution.

He said a sub-group of the advisory group of the Power Ministry would suggest forward-looking amendment to the Electricity Act to make the foundations of distribution utilities strong so that in open access they at least become revenue-neutral, if not surplus.

Open Access on Transmission and Distribution on payment of charges to a utility will enable number of players utilizing these capacities and transmit power from generation to the load centre. This will mean utilization of existing infrastructure and easing of power shortage. Trading, now a licensed activity and regulated will also help in innovative pricing which will lead to competition resulting in lowering of tariffs.

The group has suggested tightening provisions of the Section 10 of the Act, which have been misused by some states to block export of electricity from private plants outside their boundary. Further, provisions relating to grid security need to be strengthened by the Ministry before the country switches to a unified code in January by connecting the southern region to the rest of India.

The advisory group has also recommended amendment in the provisions of the Act to allow mandatory performance checks on central and state electricity regulatory commissions to ensure tariff revisions are undertaken by them on a periodic and timely basis.

New peaking power policy:

Scindia said the power ministry was also working on a gas peaking power policy which would be made part of the standard bidding documents. The government is currently carrying out a comprehensive review of the case I and case II bidding documents.

For the hydropower sector, the minister said there would be hydropower purchase obligation on state power utilities on the line of renewable power obligation.