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Powering “One India”

  • Renewable energy targets have been revised from 32 GW to 175 GW by 2022
  • In the latest round of auctions under the National Solar Mission, tariffs reached an all-time low of R4.34/kWh. Grid parity for solar generation is on its way to becoming a reality.
  • daunting challenges

    • Complexity of tariff schedules prevents economic actors from responding sufficiently to price signals.
    • Average tariffs in some cases are set below the average cost of supplying electricity.
    • High industrial tariffs and variable quality of electricity adversely affects ‘Make in India’
    • Price and non-price barriers come in the way of single-nationwide electricity prices through open access.
    • Determination of progressive tariff schedules for domestic consumers.
    • reforms in this sector are more challenging than in many others due to the clear demarcation in the roles and responsibilities of the states and centre under the constitution.
  • country with a per capita GDP that is one-seventh of the OECD average and an estimated 5 crore households without access to electricity, electricity policy, hitherto and in the future, must carefully balance economic efficiency with social benefits.
  • transparency and sImplIcIty In retaIl electrIcIty tarIffs

    • there are separate tariffs for poultry farms, pisciculture, wetland farms (above and below a certain size), mushroom and rabbit farms, etc.
    • The complexity may prevent consumers from fully responding to tariffs due to the high cost of processing the price information, a behavioural effect referred to as salience.
    • Simplification of tariffs with, perhaps no more than 2-3 tariff categories, will improve transparency and may well yield consumption and collection efficiency, along with governance benefits.
  • polIcIes In the power sector: Impact on ‘make In IndIa’
    • The ‘Make in India’ campaign is crucial to the structural transformation of the industrial sector, and the Indian economy in general.
    • To protect against uneven power supply, about 47 percent of firms report using a diesel generator.
    •  The total capacity of the diesel generators11 (DG) in the country may be as high as 72 GW and growing at the rate of 5 GW per year
  • ‘make In IndIa’ by ‘makIng one IndIa’: the open access Issue
    • Status of Open Access in India

      • The Open Access (OA) policy introduced under Electricity Act 2003, allows consumers with electricity load above 1 MW to procure electricity directly from electricity markets.
      • At its core, OA provides an aggregation of the country-wide supply and demand on the same platform. Therefore, this constitutes a first step towards discovering a single market price for power around the country.
      • In 2008, power exchanges were set up to operationalize OA and create a national electricity market where price discovery occurs through competitive bidding.
    • Some states, however, have imposed significant barriers to OA
    • 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 the goal of reducing it over time. Nonetheless, cross-subsidy surcharges over the years have gone up.
  • Box 11.1
  • The Indian Railways and Open Access

    • The Indian Railways (IR), one of the largest transportation networks in the world, consumes 17.5 billion units of energy (1.7 per cent of the country’s total electricity consumption) for which it pays about R12,300 crore to distribution companies annually.
    • As such, the cross subsidy charges levied by states may not be applicable to it, though charges for using states’ transmission and distribution networks will continue to be paid.
  • Box 11.2: Salient features of policy action on distribution front
    •  Ujwal DISCOM Assurance Yojana (UDAY)

      • States shall take over 75 per cent of discom debt outstanding as of September 2015.
      • Reduction of Aggregate Technical & Commercial (AT&C) losses to 15 per cent by 2018-19.
      • Reduction in difference between average cost of supply and average revenue realized (ARR) by 2018-19.
      • Increased supply of domestic coal to substitute for imported coal.
      • States shall take over future losses of discoms in a phased manner.
      • Banks/FIs not to advance short term debt to discoms for financing losses.
    • Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY)

      •  Electrification of all villages.
      • Metering of unmetered connections for reducing losses.
      • Separation of feeders to ensure sufficient electricity to agriculture and continuous supply to other categories.
      • Improvement of sub-transmission and distribution network to improve the quality and reliability of supply.
    •  Integrated Power Development Scheme (IPDS)

      • Strengthening of sub-transmission and distribution network in urban areas.
      • Metering of distribution transformers /feeders / consumers in urban areas.
      • IT enablement of distribution sector and strengthening of distribution network.
    • Domestic Efficient Lighting Program (DELP)

      • 77 crore LED bulbs to replace household and street light incandescent bulbs.
  • National Tariff Policy, 2016

    • Cross subsidy surcharge formula revised.
    • Regulator will devise power supply trajectory to ensure 24X7 power supply for all consumers latest by 2021-22 or earlier.