If even a small fraction of the reform signals offered in the Economic Survey translate into action on the ground, it would go a long way in sorting out the mess in the country's power sector.

Spelling out the need for key reform measures in the power sector, the Economic Survey has called for the need to opening bulk supply of electricity to competition, revising tariffs to more economic levels by reducing subsidies and beefing up the regulatory regime.

Uneconomical

Pointing out that India currently has one of the lowest and “most uneconomical” average electricity tariffs in the world — at 8 cents a unit at the retail level, compared to about 12-15 cents in countries endowed with more coal or gas and 19-10 cents/unit in others — the Survey has called for elimination of subsidies and cross-subsidies.

It also suggested reducing the monopoly of the State electricity boards (SEBs) in power distribution by introducing competition in the distribution sector and open access at bulk level.

Open access

The introduction of open access essentially enables an end-consumer to shift to a supplier of his choice.

The high transmission and distribution losses in the sector, it said, were “draining public revenues, forcing larger price increase requirements and causing massive losses to the state electricity boards, which is about one per cent of the Gross Domestic Product.

“It stressed on the strong role of independent regulators to ensure adequate competition and act on uncompetitive behaviour in wholesale trade (of electricity), including capping wholesale tariffs and investigating competition.

3 broad ways

In view of the monopoly of SEBs in power distribution, with mounting losses and poor services, the survey suggested three broad ways to encourage open access or putting the bulk of power supply for sale in the market.

First, there could be a public-private partnership mode with open access, where long-term concessions were granted to private distribution companies. These firms would be required to make high investments and adhere to performance benchmarks.

Second option that has been suggested is a distribution franchisee model, where operators are selected through competitive bidding and ownership of the assets remains with the State power distribution company.

In the third mode, there could be a performance-based State distribution company where open access is allowed.

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