Power subsidy requirements up 26%: Icra

Written by Indronil Roychowdhury | Kolkata | Updated: Sep 30 2009, 05:46am hrs
The total subsidy requirement for power sector in the country has increased from Rs 9,116 crore in 2006-07 to Rs 13,876 crore in 2007-08, an increase of 26%. The surge is despite emphasis by the government on the power sector reforms in line with the Electricity Act of 2002, which emphasised on non-subsidised power, a study by Icra, an associate of the US-based Moodys Investors Services has revealed.

The increase has been attributed to the supply of subsidised power to a category of consumers.

The countrys installed capacity has gone up from around 74,000 mw to around 1,54,000 mw in the last seven years, but the increase has been mostly in the thermal generation, though the target was to have an ideal mix of hydro and thermal in ratio of 40:60.

The input costs for producing thermal power have increased substantially due to an increase in transportation charges and additional expenditure to lower emission added to the cost of producing thermal power, the study said.

There was a nominal increase of 0.1% in the cost of power production due to a 10% increase in the price of coal two years back.

Power trading which refers to carrying out power transactions on term ahead basis was started on September 15 by the Indian Energy Exchange this year . It has contributed to improved financial performance and cash flows for some utilities. But sustainability of gains from trading will depend much on a situation like deficit in one region and surplus in other region at one point of time. The states, restraining themselves from over-drawal of power and maintaining grid discipline, will also enable power trade at a larger scale.

Further, the ability of utilities to benefit from power trade, will also depend on the extent to which such gains are shared with the customers as intra-state open access. It will give customers choice of various tariff plans like post-paid mobile phone users in the near future, the study observed.

However, Icras study on the performance of state-owned power distribution utilities and integrated utilities (in the states where the state electricity boards have not been unbundled) over a period of four years in eight large states, has shown that sustained efforts in the areas of energy audit, system strengthening, rural load management and prevention of theft have reduced transmission and distribution losses. It also has a positive impact on the balance sheets. The state electricity boards, which are yet to unbundle as well as the distribution utilities, formed after unbundling of state electricity boards still depend on government subsidies.