Govt Plans To Deregulate Fuel Price For Ipps On Anvil

The government plans to deregulate the price and supply of fuel for private power producers to ensure their uninterrupted growth. Efforts are on to decentralise the pricing system and liberalise the fuel markets to mitigate the risks in the power sector, Rakesh Kakkar, joint secretary in the Union power ministry, said at a seminar here yesterday.

At the seminar on `Mitigating Risks in Power Projects in India, Kakkar said that inexperience on the part of the government in formulating fuel supply agreements and negotiating power purchase agreements between states and private power developers were two major hurdles bogging down the countrys venture with private power.

 

He emphasised on the importance of setting up of an independent tariff regulatory body to address the problems of tariff fixation. He said several projects which had received techno-economic clearance from the Central Electricity Authority were being held up because their finances were not tied up due to the uncertainty regarding cash flow. Tariff reforms at the state level was cited as another obstacle.

Excessive government intervention is one of the main reasons for the poor financial health of the state electricity boards (SEBs), Kakkar said. He said that to improve the financial health of the boards there was a need to move towards a regime where market principles take over government decision making and the private sector plays an independent role.

Reliance Power president D V Kapoor said that procedural delays and long-drawn negotiations have led to almost no capacity being added during the eighth plan five year plan. He said that the power sector would have to grow at the rate of more than 12 per cent in order to achieve a GDP growth of seven per cent.

At the current pace, he said, the government would drastically fall short of the ninth plan target. He also said that privatisation of distribution was necessary to check the theft in power.