Power minister RK Singh says a revival scheme for gas-based power plants and a tariff policy are in final stages of being drafted.
The government plans major reforms in the power sector, including revival schemes for state distribution companies and fuel-starved power plants that depend on natural gas. A package of structural and tariff reforms is also expected.
This is good news for the power sector, which has been dogged by acute financial stress because of fuel scarcity, delayed clearance and poor health of state distribution companies that are usually the monopoly buyers of electricity.
Finance minister Nirmala Sitharaman, in her first budget speech, also announced a scheme to invite global companies through transparent competitive bidding to set up mega manufacturing plants in technology areas such as semi-conductor fabrication, solar photovoltaic cells, lithium storage batteries and solar electric charging infrastructure, and provide investment-linked exemptions under Section 35 AD of the Income Tax Act, and other indirect tax benefits.
Sitharaman said the government is examining performance of the Ujwal Discom Assurance Yojana (Uday) and it will be improved. She also said the Centre will work with state governments to remove barriers such as cross subsidy surcharges, undesirable duties on open electricity sale and captive generation for industrial and other bulk power consumers. “Besides structural reforms, considerable reforms are needed in tariff policy. A package of power sector tariff and structural reforms would soon be announced,” she said.
Sitharaman said the government will support private entrepreneurship to encourage farmers to produce energy from solar installations in fields. Singh said they can earn a minimum Rs 1 lakh annually from every acre.
Sumant Sinha, chairman, ReNew Power, said measures like one nation-one grid and creating green infrastructure along with affordable housing can transform lives.
Uday has faced criticism owing to rising debt and overdues of discoms. The gap between average cost of supply and revenue recovery reduced from 59 paise at the beginning of Uday to 17 paise in FY18. However, the revenue gap widened in nine months of FY19 to 35 paise, from 26 paise in the yearago period, on higher coal and freight charges, lesser subsidy disbursement by states and ineffective tariff hikes by regulators.
Accumulated debt of distribution companies is Rs 3.52 lakh crore, old debt is Rs 2.02 lakh crore and fresh borrowings are at Rs 1.5 lakh crore. Dues to generators have touched Rs 41,000 crore.
PwC India partner and leader (power and utilities) Sambitosh Mohapatra said the focus on group captive can trigger massive interest of large international utilities to invest in the power sector. Nabin Ballodia, partner (tax), KPMG India, said the budget’s provisions would provide a fillip to the renewable energy sector.