The Union power ministry has decided to rework a Cabinet note on hastening the implementation of open access, where large consumers of power will be allowed to choose their supplier.An inter-ministerial task force on open access, headed by Planning Commission member B K Chaturvedi, had given an earlier report. Post this, the Prime Minister’s Office had asked the Cabinet Committee on Economic Affairs to finalise a policy on the matter.Apart from ensuring state governments’ compliance, another point of contention is an earlier proposal by the Planning Commission to allocate a portion of power generated from centrally-owned utilities for open access to large consumers. The power ministry had opposed the proposal, fearing loss of its control over allocations from the central quota.
“The proposal was to go to the Cabinet, but we withdrew it. We had made a number of recommendations, but there was dilution in certain provisions. We are reworking on this to incorporate more measures and further strengthen it,” said a government official, adding that the proposal in the new format would be re-introduced soon.
The official said a new committee had been set up, again under Chaturvedi’s chairmanship, to suggest ways to give more teeth to the existing provisions in the draft Cabinet note.
The idea of open access was introduced for the first time in India by the Electricity Act of 2003, which had assigned the deadline of January 27, 2009, for grant of open access to all consumers with electricity requirements of above one Mw. The idea was to introduce more competition in transmission and distribution and enhance efficiencies in power supply for consumers.
While applications seeking open access for over 25,950 Mw have been given till date, implementation has been only for 7,400 Mw. That too largely for captive power, according to the latest data from the Forum of Regulators, a government body consisting of heads of state power regulators and that of Central Electricity Regulatory Commission.
Relevant issues
“The provisions of the original note were considered too dilute to meet the objective. There were proposals that the power ministry did not accept. Also, many others proposals were in the nature of sending advisory letters to the states, which they could disregard,” the official said.
The power ministry has discretion in allocation of 15 per cent of the overall power produced by generating utilities owned by the Centre. This amount of unallocated power is generally used by the government to bridge the gap of demand and supply when a state faces huge electricity deficits.
India generates around 700 billion units (BUs) of power annually, of which the central generating stations account for 43 per cent, or 300 BUs. If the Cabinet committee accepts the Planning Commission’s proposal, roughly 75 BUs of power will be available for sale through open access.
One stumbling block for open access is the high cross-subsidy surcharge, the amount paid by a consumer switching his electricity supplier to his existing supplier, to offset the loss incurred by the latter on this account. “The state regulators have fixed cross-subsidy surcharges that are so high, it becomes difficult for the consumers to change their supplier,” said a Planning Commission official.
There are divergent views also on whether setting aside some power for sale through open access is a solution to the problem. “The central government’s quota of unallocated power is not sufficient to meet even the existing shortages of power. If we take away more power (from the quota), we are causing more hardships in availability,” said a power ministry official.
Setting strict penalties for defaulting states is another solution, according to other experts. “If the government wants to enforce open access, it should come out with a mechanism under which those states which do not allow open access of power could be penalised by refusing them their share of unallocated quota,” said Kuljit Singh, head of transaction advisory services, Ernst & Young.
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