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Government set to delicense power generation

Santosh Tiwary

The government is set to completely delicense generation of power, according to the draft Electricity Bill prepared by the power ministry. This is a major deviation from the NCAER (The National Council for Applied Economic Research) recommendations on the Bill.

The NCAER draft final report on the Electricity Bill had suggested provisions for setting up new generating stations without licence, subject to the central government's rules regarding location, fuel or other matters of public importance.

However, the draft Electricity Bill already vetted by the law ministry and likely to be introduced in Parliament in the monsoon session, envisages that new generation projects would not require even the techno-economic clearance from the Central Electricity Authority. The projects, will only have to conform to the minimum technical standards laid down by the CEA. Sources said that CEA standards were necessary to stop infusion of old technology.

Further, the Bill also proposes to free setting up of captive generation plants. The NCAER report was silent on this issue. The Bill allows construction, maintenance and operation of a captive generating plant and dedicated transmission lines.

However, third party sale has not been allowed to stop IPPs' backdoor entry in the captive sector. Sources said that third party sale would be permitted only after the regulatory commission allows open access. They added that the provisions for open access and bulk sale of electricity have been made stricter.

The draft Bill has also touched on the hydro-power sector, on which the NCAER draft report was silent. Under the Bill, hydro projects would need clearance of the state government. The state governments would be required to take the Centre's prior consent on the impact on riparian rights of other states.

In transmission, load despatch would be done by an independent entity not being a private entity. Its directions would be binding on generating stations, transmission companies as well as distribution companies.

For distribution, retail tariffs would be determined by the regulatory commissions, until competition is established, when only wheeling charges would be regulated.

Sources said that the Bill seeks to formulate a national policy in consultation with state governments and SERCs for bulk purchase of power and management of local distribution through a user association, co-operative, franchisee or Panchayat for rural areas.

It also stresses on progressive reduction of cross-subsidies from consumer tariff and movement towards actual cost of supply. The state governments are required to provide subsidy through the budget for specified target groups if it wanted the tariff to be lower than that determined by the regulatory commission.

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