Power reforms: RK Singh bats for open access, flays PPA breaches

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Published: October 12, 2019 4:28:14 AM

Under the open access system, large consumers have access to the transmission and distribution (T&D) network and this enables them to source power from suppliers other than the local discom.

“We cannot increase jobs in the power industry unless we open up the distribution sector and allow more companies to compete with one another,” Union power minister RK Singh

Narmada, Gujarat: In a candid disapproval of the way state-run electricity discoms are run in the country and how even the UDAY scheme for their revival seems floundering, Union power minister RK Singh on Friday called these entities “inefficient structures” and said that efficiency would prevail only when consumers get to chose their suppliers. While ‘open access’ continues to be elusive for most of the country despite the Electricity Act 2003 providing for it, the minister said end-consumers should have the options to choose where to buy electricity from.

Under the open access system, large consumers have access to the transmission and distribution (T&D) network and this enables them to source power from suppliers other than the local discom.

“It is difficult for governments to run retail systems; however, it is good with handling wholesale businesses,” Singh said, addressing state power ministers. “We cannot increase jobs in the power industry unless we open up the distribution sector and allow more companies to compete with one another,” he asserted.

In the wake of state governments like Andhra Pradesh and Uttar Pradesh dishonouring the power purchase agreements, Singh stressed that sanctity of these contracts must be preserved, while also calling for payment discipline by both discoms (to gencos) and their customers.

Discoms’ financial losses stood at Rs 28,369 crore at the end of FY19, up 88.6% year-on-year. Discoms face cash-flow issues because state electricity regulators raise consumer tariffs inadequately. Dues from bulk consumers such as state government departments and local civic bodies, pegged at a whopping Rs 47,000 crore at May-end, have also significantly impaired the discoms’ ability to turn around. “If we install the prepaid meter system, supply will be automatically be disconnected to defaulting consumers”, the minister said.

At the other end of the scale, discoms are also not paying gencos on time with overdues —payment default of 60 days or more — by discoms to power producers standing at Rs 59,586 crore at August-end. Delayed payments impair the generating companies’ ability to service debt and exhaust their working capital. This leads to lower credit ratings and higher interest rates for them.

Obliquely referring to the recent decision of Andhra Pradesh to renegotiate the state’s PPAs with renewable power producers, the minister said that “one such breach caused five different ambassadors getting in touch with me”. Experts have cautioned that recent instances of curtailment of solar and wind power in Andhra Pradesh and UttarPradesh can throw a spanner in the country’s ambitious plans of having 175 GW by December 2022. Renewable energy ministry Aanand Kumar said that to achieve the said target, 25 GW of renewable energy tenders would be bid out by FY20-end.

Singh also denounced the practice of overcharging industrial consumers to subsidise households and farmers (cross subsidy). “How can states get investments if you are charging Rs 8-9/unit to the industry?,” Singh said. The power ministry plans to cap cross-subsidy at 20%, which could reduce the cost of electricity for businesses by up to 14-20%.

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