1. Niti Aayog: Manufacturing growth facing state power rules hurdle

Niti Aayog: Manufacturing growth facing state power rules hurdle

Niti Aayog, in its draft Three-Year Action Agenda for FY18-FY20, noted that state regulations are preventing large industries from buying power directly from the electricity market, thus restraining the growth of the manufacturing sector.

By: | Published: April 29, 2017 5:42 AM
Niti Aayog, Discoms, India, Electricity Niti Aayog, in its draft Three-Year Action Agenda for FY18-FY20, noted that state regulations are preventing large industries from buying power directly from the electricity market, thus restraining the growth of the manufacturing sector. (Reuters)

Niti Aayog, in its draft Three-Year Action Agenda for FY18-FY20, noted that state regulations are preventing large industries from buying power directly from the electricity market, thus restraining the growth of the manufacturing sector. The state regulators levy substantial cross-subsidy charges which make it unviable for heavy consumers to buy electricity from spot markets through open access. The cross subsidy charges are between `1 to `2.5 per unit, which supplements the burden of existing high industrial power tariffs.  The all-India average tariff for high tension industrial connections charged by discoms is more than `7 per unit. This is higher than several countries with per capita GDPs comparable to India, and even more than some nations with higher income levels. On the contrary, the average market clearing price of power at the Indian Electricity Exchange was `2.41 per unit in FY17.

Citing the near monopoly status enjoyed by the state electricity distribution companies (discoms), the government think-tank said such practices are proving to be an impediment to the Narendra Modi government’s ‘Make in India’ initiative. The report also said industrial consumers are paying premium prices for a poor quality of electric supply. Industries encounter problems like equipment damage, production losses and other costs due to problems such as power cuts and voltage fluctuations. Opening up the power market for competition would not only help the manufacturing sector, but also would boost the power sector which is currently languishing with low plant load factors in the face of tepid demand, the report added.

The Electricity Act of 2003 has provisions which allows buyers (with more than 1 MW consumption) to purchase power from the electricity market instead of the discoms through open access. Though it allowed state regulators to impose cross subsidies and surcharges, it was said such surcharge and cross subsidies would have to be progressively reduced.ghbourhood of Karachi.

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