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| India Infoline Sector Reports | Wed, 18-Feb-2004 16:50:29 IST (GMT+5:30) | |
| Power | ||
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The Regulatory Framework The Central Government has regulatory powers vis-a-vis bulk generators and distribution licensees with regard to important elements in the permitted tariff (rate of return, rates of depreciation). CEA is responsible for planning regulation. This is done by regulating the entry of new bulk generating units and central clearance to all major projects of SEBs, licensees and generating companies. Setting of safety standards and overall technical regulation is also done by CEA. State governments have powers of direction in relation to SEBs and have regulatory functions (grant of licences, terms thereof, revocation of licences etc) vis-a-vis all distribution licensees. Apart from being in a position to exercise monopoly in power, as the sole selling agency controlling state level transmission, SEBs also exercise regulatory functions in relation to distribution of licensees, including control over operations and reserve powers in the tariff area. Following enactment of the Electricity Regulatory Commission Legislation, the Central Electricity Regulatory Commission was set up, to enable States to establish their own independent regulatory commissions. Tariff Structure Different categories of consumers of electricity are charged different rates. The tariffs for domestic and agricultural consumers are less than the average unit cost of supplying electricity. The tariff rates for the commercial, industrial and railways categories are more than the average per unit cost. Thus the consumers of the first set of categories are cross-subsidized by the consumers of the second. The industrial consumers have to pay as much as Rs4.25 to 4.80 per unit in some States. This is higher than the captive power generation cost of Rs3.30 per unit. This results in the industry putting up their captive plants. The industry tariff structure is therefore in jeopardy, adding to further sickness of SEBs. The solution lies in making agriculture pay at least part of the cost, which is politically unpalatable. However, with the worsening of state finances, it is likely that some states might announce tariff hikes. Average tariff (industrial consumption) Developed Countries (Rs/unit)
Developing Countries (Rs/unit)
As per the Planning Commission, the total subsidies in the power sector amount to about Rs22bn (which#includes commercial losses of SEBs, often shown as subsidies). India needs a 15/20 year perspective plan with a total focus on controlling the average cost of power. Hydro and nuclear power therefore need greater attention.
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