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MAY 12 2014

Centre finalises proposal to extend tariff policy for hydel projects till 2022

  • Economic Times, ET Bureau / Hyderabad
  • Created: Mon 12th MAY 2014

Sources pointed out that as the Cabinet Note seeking the tariff policy's extension has already been circulated, fresh approval would be required from the new Cabinet which would be formed once a new dispensation comes at the Centre.

In a move likely to benefit the stressed hydropower projects in the country, the newly-elected Government at the Centre would have the opportunity to provide them relief if it clears the proposal to extend the existing tariff regime for such projects till 2022.

Official sources said that the Power Ministry has already finalised the Cabinet Note on extending the tariff policy (which is applicable till 2015) till 2022, and as a new Government is expected to assume power at the Centre within the next 10 days, they expressed hope that it would be only too happy to clear the proposal.Once extended, the cost-plus option available in the tariff policy would allow hydro projects to avail the benefit of selling 40 per cent of electricity generated by them at merchant rates till 2022. Also with merchant power prices being normally higher than those offered to customers with which companies have long-term contracts, the move will benefit private sector developers.

In lay man's terminology, instead of selling electricity generated through hydro projects to customers through long-term contracts, the companies have the freedom to sell it as a commodity at market rates or merchant rates.Sources pointed out that as the Cabinet Note seeking the tariff policy's extension has already been circulated, fresh approval would be required from the new Cabinet which would be formed once a new dispensation comes at the Centre.

While seeking extension of the cost-plus tariff policy, the Note circulated by the Power Ministry also aims at increasing participation of private sector in transmission of electricity.The note also carried another option which would ensure that variation in fuel and power purchase cost is recovered by the power generating firms.Sources privy to the development said that as of now State-owned PowerGrid has the monopoly in terms of handling transmission of electricity in the country. Now the Government is trying to bring in greater participation of private sector players in this field by facilitating their entry through bidding. This would ensure multiplicity of agencies in transmission of power, they added.

Also the Cabinet Note seeks to strengthen the renewable purchase obligations (RPOs) of discoms, wherein distribution companies would have to purchase an increased share of electricity which is generated through renewable energy.With Government having realised the significance of renewable energy as an essential requirement in the power sector in the near future, it wants discoms to increase the share of electricity (which they purchase from power companies) produced through such sources.

The stakeholders which had submitted their feedback on the Cabinet Note included Central Electricity Authority (CEA), Central Electricity Regulatory Commission (CERC), Principal Secretaries of all the state governments and chairpersons of power generation, transmission and distribution utilities.

Tags

Renewable Purchase Obligation Grid Carbon Emission Reduction Central Electricity Regulatory Commission Central Electricity Authority Electricity Regulatory Commission PowerGrid Power Electricity

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