Reforming power-pricing: Constraints must be reconciled through policy interventions and reforms

Extending electricity connection to every household is the greatest power reform touching the life of the common citizen. Now, 24×7 quality power at affordable prices must be ensured. But, the buzz on the next round of power reforms is centred on the amendments to the Electricity Act (EA) and/or the Tariff Policy proposed rather than the addressing of structural issues fettering power supply.

Power sector suffers from problems of plenty due to the surplus generating capacity, increasing renewables without retiring old and polluting coal-fired generators, long tenure of power procurement agreements, excess tied capacity and aggressive energy efficiency drive.

By March 2020, the installed capacity was 370.05 GW, excluding 54.93 GW of captive capacity. So far, the electricity demand in the country has never gone above 183 GW. Even tied capacity is also around 300 GW. Power distribution companies (discoms) are also mandated to buy renewable energy under the Renewable Purchase Obligation. As a result, states have more than 30-40% of the installed capacity either backed down or shut down. About 15-35% of total fixed cost payable by discoms corresponds to unscheduled electricity.

India has taken significant steps to improve energy efficiency, avoiding about an additional 15% of annual energy demand and 300 million tonnes of CO2 emissions over the period 2000-18, according to IEA analysis.

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