Can India's new power reforms finally deliver the jerk this sector needs?
Copyright © HT Digital Streams Limit all rights reserved. India’s electricity reforms: We should not allow the latest effort to eliminate most state regulators, it is barely independent and approves of the cost of costs. (HT) Summary of India’s electricity sector has long been cried by politics, subsidies and inefficiency. The proposed center reforms are aimed at changing it – by keeping regulators into account, enabling real competition and pushing states to act. But can they overcome the resistance that previously progressed short -circuit? The center has recently proposed legislative changes to strengthen and reform India’s electricity sector “in accordance with the ‘developing operating requirement’. This is an urgent goal, given new pressure on the Indian industry to become more competitive, whether it is trading winds or higher supply chain costs. Back at home, to their disadvantage, businesses are dealing with costs and time load imposed by protracted statutory approvals and ineffective logistics. In the global arena, our electricity tariffs for industrial use are on average higher than in China, but lower than which factories pay in the US, and even lower than compared to Europe. We have room to lower it and improve our competitive advantage. The industrial consumers of electricity consumers and farm consumers subsidize Gujarat, in industrialized states – such as Tamil Nadu and Karnataka. Among other things, the draft bill on the electricity of the electricity of 2025 seeks to eliminate the cross-subsidy over five years. However, this alone would be insufficient, as electricity is a simultaneous topic in the Constitution of India and it is that states must implement this reform. Their reluctance to shake off populism, or at least pay for it, was clear. Most of the state regulators are barely independent and approve rates as the cost of the cost. As a result, at the national level, the fees owed to aid programs have been called “regulatory assets” over the years on a staggering £ 3 billion, as is estimated, while the stack of losses is more than twice. Although the center policy of the center tried in 2006 to lower the cross subsidy to below 20% of the average supply cost by 2011, this has not been done for a long time. To release this regulatory capture, the amendments seek to hold individual regulators accountable. If they violate the norms, they can be fired. However, this is a double -edged sword, as a change in the government of a state can lead to a political witch -hunt against those who refuse to play ball on populist movements that the state budget does not have to finance. Thus, unless adequate precautions are built at the implementation level, little is left of regulatory independence. Hopefully, the amended law will obtain the regulatory interference, especially as it also seeks to upgrade the center’s interaction with states via an electricity council that works with the state power ministers to come to a consensus on reforms. This platform can also help unlock an opportunity to improve the quality of consumer service, as suggested by the center. So far, distribution programs have had a monopoly, as the barriers to competition are great, with new players needed to set up parallel wires to provide electricity to consumers. The amendments are aimed at gaining new entrants access to existing networks. Once the bill was made, the state administrations would be expected to invite competitive players. The economic merit of this is clear: lower accounts for the consumer, thanks to more efficient power acquisition, and lower costs for utilizing the maintenance of the supply infrastructure. The platform can push the political class to implement the plan and reduce the space for political parties to share it wrongly as ‘privatization’ in their polling rhetoric. In general, the success of these measures, together with the other proposals of the bill, would require the center to meaningfully engage and push states, while helping with any financial support that the latter needs. This will speed up this important sector’s path to commercial viability. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More Topics #Electricity #Egry Prices Read Next Story