'Big bang power sector reforms will benefit masses'

Given the constraints in existing market and system operations and challenges of energy imbalance, it is high time the country brought about changes in the market design in the real-time segment.

Hyderabad:The Indian economy has nearly reached the USD 3 trillion milestones. The new target set in the General Union Budget presented on 5 th July by Finance Minister Nirmala Sitharaman is to reach USD 5 trillion target by 2025.

As rightly pointed out by the Finance Minister, the most important aspect of achieving USD 5 trillion economies is building physical and social infrastructure with special emphasis on the energy sector.

The Union Budget 2019-20 has promised to take connectivity infrastructure to the next level. Among all the promise of 'One Nation, One Grid' is the most prominent one that seeks to ensure power availability to states at affordable rates.

Recent Reforms

Measures like One Nation, One Grid and creating green infrastructure along with affordable housing can transform lives. Finance Minister said the much-needed power reforms such as the power tariff reforms should be soon taken up.

A discussion paper on ‘Re-Designing the Real-Time Electricity Markets in India’ was published in the CERC website on 25 July 2018 inviting comments/suggestions. In response to the paper, 21 stakeholders including POSOCO, Power Exchanges, Trading Licenses, IPPs, State Utilities, State LDCs, Generators and Consultancies submitted their comments.

The proposed Real Time Market (RTM) would not only provide discoms with an alternate mechanism to access a larger market at a competitive price but would also allow the generators to participate in the RTM with their un-requisitioned capacity. This will definitely ensure the procurement of electricity by the masses at an affordable tariff.

As a step towards creating a market platform for trade of energy closer to the delivery of power in real time, a framework for Real-Time Market for electricity is already proposed and a public notice (No. RA-14026(11)/2/2018/CERC) issued by CERC on 6 August 2019 to finalise formation of the real time market.

The recommendations of the High-Level Empowered Committee (HLEC) on the retirement of old and inefficient plants, and addressing low utilisation of gas plant capacity due to paucity of natural gas, will also be taken up for implementation now.

Ujwal Discom Assurance Yojana - UDAY

Sitharaman said the government is examining the performance of the Ujwal Discom Assurance Yojana (UDAY) and it will be improved. The Government launched Ujjwal DISCOM Assurance Yojana (UDAY) in 2015 aimed at financial and operational turnaround of DISCOMs.

UDAY has faced criticism owing to rising debt and overdues of discoms. The gap between average cost of supply and revenue recovery reduced from 59 paise at the beginning of UDAY to 17 paise in FY18.

However, the revenue gap widened in nine months of FY19 to 35 paise, from 26 paise in the year ago period, on higher coal and freight charges, lesser subsidy disbursement by states and ineffective tariff hikes by regulators.

Central government is intended to work with the State Governments to remove barriers like cross subsidy surcharges, undesirable duties on open access sales or captive generation for industrial and other bulk power consumers.

Besides these structural reforms, considerable reforms are needed in tariff policy. A comprehensive reform of power sector tariff and structural reforms would soon be announced.

Given the constraints in existing market and system operations and challenges of energy imbalance, it is high time the country brought about changes in the market design in the real time segment.

One Nation, One Grid

Subba Rao Amarthaluru, Executive Director- Finance and Strategy at CLP India, said, “the announcement of pursuing a ‘One Nation One Grid’ concept is a positive move and will prove beneficial in achieving the government’s goal of power for all by 2020. Government’s move to focus on driving structural reforms in the power sector is commendable, and will definitely help in propelling the sector towards the path of growth. This will fuel investments and address the issues concerning stressed power plants.”

(Dr. Hiranmoy Roy is the Head of Department of Economics and International Business at University of Petroleum and Energy Studies, Dehradun)