Electricity tariffs could go up, after the Cabinet on Wednesday gave its approval for an amendment to the Power Tariff Policy to allow producers to pass on the effect of any change in domestic duties, levies, cess and taxes.

The automatic pass-through provision was welcomed by the industry as a move that will remove ambiguity and uncertainty for competitively bid projects.

Further, the amendment to the tariff policy also allows for pass-through of the cost of sourcing coal if Coal India fails to meet its fuel supply commitments.

Simultaneously, the policy allows developers to expand their plants by up to 100 per cent of their capacity through the automatic route.

Piyush Goyal, Minister of State (Independent Charge) for Power, said that such a provision would allow for the optimal use of land as well as reduce the time required to secure environmental clearances.

The tariff policy also allows power plants to sell the surplus electricity through power exchanges.

“The benefit of such sale of electricity, after deducting the variable cost, will have to be shared with the electricity distribution utility,” Goyal said.

This is for plants where State electricity distribution utilities are not buying the contracted capacity as per the power purchase agreements. The tariff policy also provides for all transmission projects to be given through competitive reverse bidding. Only inter-governmental projects or those involving security risk will be given on a nomination basis.

Solar, wind power The policy also waives inter-State transmission charges for solar and wind power. This will help in reducing litigation, says Ashok Khurana, Director-General, Association of Power Producers.

In a separate decision, the Cabinet Committee on Economic Affairs agreed to set up over 5,000 MW of grid-connected solar power projects by providing viability-gap funding (VGF) of ₹5,050 crore.

Project developers will have to take part in a reverse-bidding mechanism to get VGF support. The support will be capped at ₹1.25 crore for the capacity reserved for domestic content requirement projects and ₹1 crore for all other projects.

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