The Hindu : Business : New policy to ensure quality power at affordable rates

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Friday, Feb 04, 2005

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Business

New policy to ensure quality power at affordable rates

By Our Special Correspondent

NEW DELHI, FEB. 3. The National Electricity Policy, approved by the Union Cabinet on Wednesday, estimates that an investment of Rs. 900,000 crores will be required to fund generation, transmission, distribution and rural electrification projects up to the year 2012 to meet the objective of rapid economic growth and "power for all.''

For this, while public sector investments at Central and State levels will have to be stepped up, a major chunk will be required to be brought in from the private sector and for which the return on investment has to be provided at par, if not at better terms of investment opportunities in other sectors, especially when electrification of all villages and households in the next five years is one of the prime targets of the National Common Minimum Programme (NCMP).

Addressing a news conference here on Thursday, the Minister for Power, P. M. Sayeed, noted that the investment target was not "ambitious,'' considering the fact that in the past 13 months, financial closure had been achieved for generation projects totalling 5,000 MW. Moreover, in the next two months, another 9,000 MW would be poised for addition to the list at an overall investment of Rs. 50,000 crores for 14,000 MW.

Still more heartening, he said, was the fact that all the projects in the pipeline, when completed, would be able to supply power at a tariff of about Rs. 2-2.20 per unit (kWh).

The Minister also utilised the opportunity to release to the press the bidding guidelines for determining the tariff for power distribution by the licensees which was notified by the Centre on January 19 this year. It is aimed at moving away from the existing "cost plus'' approach for tariff determination which, in turn, is expected to further encourage private investments into the sector by way of promoting competitive procurement, facilitating transparency and fairness, providing flexibility to suppliers on the availability of power while ensuring tariff certainty for buyers.

Essentially, Mr. Sayeed said, the long-overdue electricity policy laid down the road map for smooth development of the power sector so that while the project promoters were assured of adequate returns, the consumers were ensured the supply of quality power at affordable rates. This could only be ensured by promoting competition through open access in transmission and to distribution networks (initially for bulk consumers) for which the State Regulatory Commissions have been told to notify guidelines by June.

The policy is also aimed at paving the way for the Central Electricity Authority (CEA) to notify the first National Electricity Plan in six months with a perspective up to the 12th Plan.

The tariff guidelines, valid for medium-term and long-term procurement of electricity, permit location, technology and fuel neutral projects.

Mr. Sayeed said that the Centre would be issuing standard bid documents to reduce delays in getting the necessary approvals.

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