Industries can use excess power generation capacity via open access in a push for Make in India while power discoms can explore the possibility of progressivity in tariff setting so that charges for the poor come down, suggested the Economic Survey.
“Time is ripe for industries to absorb excess generation capacity through Open Access to energise Make in India,” said Economic Survey for 2015-16 tabled in Parliament today.
The Open Access policy under the Electricity Act, 2003, allows consumers with electricity load above 1 mw to procure power directly from markets.
It was observed that some states have imposed significant curbs on the policy.
This problem was meant to be addressed by the National Tariff Policy (2006), which established a methodology for determining the cross—subsidy surcharge to be levied on OA consumers, with a goal of reducing it over a period of time.
“Nonetheless, cross-subsidy surcharges over the years have gone up,” it found.
It noted that the new paradigm of surplus power sets the stage for continuing these reforms so that India can become ’one market’ in power and the burden on industry can be mitigated, allowing it to become internationally competitive as envisaged under Make in India.
The report suggested that the tariffs can be made simple and transparent avoiding proliferation of end-use charges. It also noted that charges for the poor could be reduced while generating more revenues by taking advantage of the possibility of greater progressivity in rate-setting.
The progressivity in power tariff rates means an increase in tariff with a higher consumption level. This helps in reducing tariff for those who are at the bottom of society.
“Progressivity in tariff rates is to reduce burden on the poor without unduly burdening the rich. India’s domestic power tariff schedules have greater scope for progressivity,” it said.
It was pointed out that the cross—subsidisation will occur within the residential consumers itself — rich consumers with high consumption intensity within residential sectors subsidise prices for consumers with lower consumption due to differential demand price elasticity.
On progressivity in tariff, the Survey said, “States and their regulators will have a key role to play, with helpful facilitation from the Centre. The power sector is a perfect crucible for making effective co—operative competitive federalism experiment, that is now India.” it said.