Reforms of Power Sector & Liberalisation. The Indian Perspective

Transcription

1 Reforms of Power Sector & Liberalisation The Indian Perspective

2 Background Indian power sector, characterised by vertically integrated Govt-owned State Electricity Boards (SEBs). A structure since Independence (in 1947). Prior to Independence supply of electricity limited to cities responsibility for supply primarily with private licensees

3 Background After Independence, electricity sector in India was virtually nationalised. The need for the State to step in through the SEBs to extend electrification across the country. The Electricity (Supply) Act, 1948 mandated creation of SEB in each State. The SEBs played an important role in creating infrastructure.

4 Background The installed capacity of generation increased from 1712 MW in 1950 to MW today. Generation in the country has also increased from 5 billion units in 1950 to about 515 billion units today. Growth in transmission lines from 2708 ckm in 1950 to more than 200,000 ckm today.

5 Background. Over a period of time finances of SEBs started deteriorating. Their losses have been increasing and have reached unsustainable levels. There is persistent shortage of power.

6 Initiation of process of liberalisation: 1991 In 1991, the first major step towards liberalisation. The generation sector was opened up for private participation The objective was to attract investment for capacity addition.

7 Experience of first liberalisation Capacity addition through IPPs remained far short of our expectation. We realised, the approach of inviting investment on the basis of Government guarantee, not the best way. Viability of the distribution sector, a prerequisite for attracting investments.

8 Distancing of Regulations 1998 In 1998, concept of independent Regulatory Commissions with powers of tariff regulations the first step towards restoration of the health of the distribution sector. The first significant step towards the distancing of regulation from the Government. The objective was to address the issues of tariff rationalisation, discipline in terms of payment of subsidies.

9 Distancing of Regulation. SEBs which were basically commercial entities also enjoyed policy responsibilities. This blurring of commercial focus bred Inefficiencies, Lack of accountability and transparency, Lack of professionalism, especially in terms of tariff fixation and payment of subsidy by the Government.

10 Distancing of Regulation. Elements of professionalism, transparency and accountability brought in through system of tariff fixation by independent Regulatory Commissions, Institution of Regulatory Commission is gaining roots in the country.

11 New Strategy New strategy of reforms focuses on restoration of commercial viability through distribution reforms. Commercial viability of the sector, a sine quo non for attracting investments in generation and transmission.

12 New Strategy Distribution Reforms - thrust areas governance related issues such as metering, energy audit, check on theft and pilferage of electricity, institutional arrangements To create accountable profit centres, followed by privatisation. technological improvements in terms transmission and distribution system improvement, use of information technology etc., and tariff rationalization with mandate to progressively reduce and eliminate cross subsidies. MOU/MOAs with the State Governments for turnaround of the sector in three to five years.

13 New Strategy Large-scale private investment in generation and transmission will flow only after reforms in distribution succeed. In the short run, no alternative to increase in public sector investment in generation. 10 th plan outlay for the power sector has been enhanced by about 270%.

14 The New Electricity Law The Electricity Act, 2003 enacted recently puts in place the mission statement of the Government of India. It seeks a qualitative transformation of the electricity sector through a new paradigm.

15 New Electricity Law Liberal Framework The Act creates liberal and transparent framework for Power Development. It facilitates investment by creating competitive environment and reforming distribution segment of power industry.

16 A Liberal Framework Competition is the hallmark, which has been ensured through the framework of delicensed generation, freedom to captive generation, recognizing trading as an independent activity and open access.

17 A Liberal Framework Delicensing of generation Enough flexibility for promoters. Regulatory Commissions would ensure that tariffs are competitive and reasonable. Captive Generation made free from controls. This will put pressure on the existing utilities to improve their performance so as to bring their supply cost at comparable level with the cost of captive generation.

18 A Liberal Framework Trading recognized as an independent and licensed activity. The concept of spot market has, however, not been envisaged, given the situation of shortage in the country. Responsibility of development of market including trading vested with the Regulatory Commissions.

19 Liberal Framework.. Non-discriminatory open access in Transmission introduced from the outset. The transmission utilities/companies debarred from trading. This is to encourage fair competition amongst generators and distributors

20 Liberal Framework Open access in distribution in time bound manner by the SERCs after taking into consideration system and cross-subsidy constraints. For open access before elimination of cross subsidies provision for a surcharge to take care of the current level of cross subsidies and licensees' obligation to supply. Open access in distribution is the centrepiece of liberalization.

21 Liberal Framework The new law allows more than one licensee in the same area of supply with permission to each such licensee to build his own distribution system No requirement of licence for generation and distribution in rural areas.

22 Liberal Framework The new law envisages deregulation of tariff fixation on certain aspects: Tariff for supply from a generating company to a distribution company involving a short term PPA (one year or less) would not be regulated. Where open access has been allowed to a consumer, he can reach an agreement with his supplier for purchase of electricity and the tariff for such transaction would not be regulated. Tariff determined through competitive bidding is also not to be regulated.

23 Liberal Framework The new law strikes the right balance given the current realities of the power sector in India.

24 Liberalisation - Indian Perspective Liberalisation in Indian context has primarily meant gradual distancing of regulatory responsibilities from the Government/Government owned agencies to independent Regulatory Commissions. Liberalisation has also meant gradual opening up of the sector for private participation, delicensing of various activities, opening up the sector to full fledged competition.

25 Indian Perspective Liberalisation in the Indian context, however, has not meant complete shedding of regulatory control. Creation of liberal and competitive framework with regulatory oversight as a measure to safeguard consumers interests has been the hallmark of reforms process in India.

26 Thank You