The changes to Power Tariff Policy cleared by the Cabinet on Wednesday, at first sight, look impressive. From the laudable objective of providing 24X7 power for all and connecting remote villages through micro-grids to introducing competitive bidding to attract private investment in transmission, the amendments are comprehensive indeed. Importantly, they address some of the issues that are now crying out for attention in the power sector. These were put on the backburner as the state utilities were battling for survival — development of the sector was the last thing on their minds. There are also some out-of-the-box ideas such as getting thermal plants to use treated sewage water and supplying affordable power to people near coal mines from plants set up with rejects from the coal washery.
It is clear that some thought has gone into these changes and to that extent the Centre deserves to be commended. Yet, the fact is that, save for a few, implementing most of these ideas would require the States to play ball with the Centre, something which we have not seen much evidence of in the past. It has been over two months since the Ujwal Discom Assurance Yojana or UDAY was launched, but just about half of the States have indicated their willingness to fall in line and only one — Jharkhand — has signed the tri-partite agreement with the Centre and the state utility. The proposal for installing smart meters which will enable a dynamic system of “time of day” tariffs has been spoken about for almost a decade now without seeing much progress on the ground. This is now part of the amendments to the Tariff Policy but with state utilities wallowing in losses and strapped for cash to even buy enough power to meet demand, investment in smart meters will obviously be low priority. Some unconventional thinking will be needed to implement such ideas; instead of utilities supplying and owning meters, consumers could be incentivised to either buy their smart meters at subsidised prices or allowed to recover the cost from their usage charges.
The Centre deserves appreciation for its relentless focus on promoting renewable energy — there will no more be inter-state transmission charges on solar and wind power; new coal-fired plants coming up after a date to be notified will have to either establish their own renewable capacity or purchase them. The proposal to allow competitive bid projects to pass through increases in taxes and/or duties is likely to raise the hackles of consumers but is probably necessary as viability of such projects could be affected otherwise. As a first step from the policy changes, the Centre should get cracking on the matter of introducing competitive bidding for transmission projects. Inter-state transmission has proved a major bottleneck in the power value chain and the Centre doesn’t need cooperation from the States to improve this.