The much-awaited amendment to the National Tariff Policy has been approved by the Union Cabinet, recently. The amendment, which comes after a decade has come at an opportune time when India is positioning to become a major power in the global economy & aims to improve India's place in the Ease of doing Business rankings. The Cabinet approval of the amendment also needs to be viewed in the context of the announcement of the UDAY scheme (Ujwal DISCOM Assurance Yojna) by the Ministry of Power. UDAY's primary objective is the financial turnaround and revival of Power Distribution companies. UDAY recognizes that financially stressed DISCOMs are not able to supply adequate power at affordable rates, which hampers quality of life and overall economic growth and development. Efforts towards 100% village electrification, 24X7 power supply and clean energy cannot be achieved without performing DISCOMs. Power outages also adversely affect national priorities like "Make in India" and "Digital India".
The new Tariff Policy takes UDAY's message forward and takes a holistic view of the Indian power sector. It has taken into account the interests of the consumers, the DISCOMs and the power generators and puts in place a roadmap that will benefit all stakeholders. It merits highlighting that the new Tariff Policy focuses on increasing the efficiency of the power industry by promoting optimum utilisation of land and other resources by allowing expansion of existing private power plants. It also advocates utilising surplus assets to decrease overall power cost and allows sale of un-requisitioned power. Moreover, the tariff policy encourages state governments to develop inter-state transmission projects and has revised & rather rationalized the cross subsidy surcharge formula. In order to reduce theft and to promote "Time of Day" metering, the Tariff Policy provides for the usage of smart meters. The Policy changes will also be positive for exchanges since generators will have another option to sell power in the spot market if in case DISCOM is not requisitioning that.
In line with India's renewable energy commitments and in order to promote energy security, the Tariff Policy aims to increase the share of solar energy to 8% of total electricity consumption by March 2022. It also allows bundling of renewable power with power from thermal plants whose PPAs have expired or plants which have completed their useful life subject to development through competitive bidding. The Tariff Policy also provides that no inter-state transmission charges and losses are to be levied for renewable power (solar/wind) till such period as notified by the Government. Measures such as these act as incentives for power producers to shift their focus to renewable energy generation. The Policy also exempts hydroelectric projects from competitive bidding till 2022 so that producers can charge cost-plus tariff from distributors. In doing so, the Policy recognizes the importance of reviving hydroelectric projects and of facilitating the ancillary services sector, which helps a grid to manage different sources of energy.
Undoubtedly, the new Tariff Policy addresses some of the systemic issues that have been plaguing the power sector and goes a long way in inspiring confidence in the sector. However, the true determinant of the success of the Policy will be adoption and execution of the same by the states. By its very nature, a "Policy" is a wish list or an objective that the government sets for it to achieve. For the Tariff Policy to have the impact that it is meant to, states and state Regulators must adopt and execute it. States must recognize that the health of the power sector directly impacts economic growth and the states' and country's fiscal well being.
