A power sector package is in the offing along with a new tariff policy to ensure uninterrupted power for all, Finance Minister Nirmala Sitharaman announced in her maiden Budget speech on Friday.
Shedding light on the ‘One Nation One Grid’ for affordable power to States, she said the much-needed power reforms — such as the power tariff reform — should be soon taken up.
The government is going to work with the State governments to remove the barriers in the implementation of the ambitious UDAY scheme for the turnaround of power distribution companies.
“The government had launched the UDAY scheme in 2015 for the financial and operational turnaround of power discoms. We are examining the performance of the scheme and will work with States to remove barriers like the cross subsidy surcharge,” said Ms. Sitharaman.
Weakest link
The distribution sector holds the key to the long-term fortunes of the power sector as discoms have so far been the weakest link in the electricity value chain. Government’s UDAY scheme has faced criticism of late owing to mounting debt and overdues of discoms.
Manish Aggarwal, Partner, Special Situations Group, KPMG in India, said, “Review of UDAY scheme, tariff policy, working with States to remove cross subsidy surcharges and open access charges are well outlined as well measured intents, though again one should be cautious and see how it is executed.”
The Finance Minister also spoke about focussing on improving the performance of the gas-fuelled power projects that have been performing at lower efficiency levels due to the limited availability of natural gas in the country.
Vimal Kejriwal, MD & CEO, KEC International, said, “I am glad to see the government’s continued focus on ‘One Nation One Grid’. I look forward to the much-needed power sector reforms package.”
High-level panel
The Finance Minister proposed to set up a high-level empowered committee to look into retirement of old and inefficient power plants and address low capacity utilisation of gas-based power plants.
Subba Rao Amarthaluru, Executive Director- Finance & 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 of 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.”
