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Parekh committee proposes power-packed reforms

A high-level government committee on infrastructure has proposed a public-private partnership...

New Delhi | Published: October 6, 2014 12:50:41 pm
The Deepak Parekh committee will also recommend earmarking 15% of the power generation capacity of Central PSUs for open access consumers. (PTI) The Deepak Parekh committee will also recommend earmarking 15% of the power generation capacity of Central PSUs for open access consumers. (PTI)

A high-level government committee on infrastructure has proposed a public-private partnership (PPP) model for power distribution starting with cities, modernisation of public-sector discoms with viability gap funding by the Centre and a unique model to privatise coal mining where Coal India or its arms retain ownership of mines.

The Deepak Parekh committee, in its final report to be submitted to the government this week, will also recommend earmarking 15% of the power generation capacity of Central PSUs for open access consumers. The idea is to introduce competition and attract private investment in power generation as producers will be able to sell directly to bulk consumers in a competitive market.

Though open access was envisaged in the Electricity Act, 2004, it hasn’t materialised as power producers continue to rely on the state-sector discoms which are hamstrung by uneconomic policies and don’t have unhindered direct access to consumers.

On the tariff front, the report suggests that consumer tariffs be rationalised and “graded” according to the paying capacity of consumers. High-income households, commercial consumers and industries should be gradually moved to market-based pricing.

These consumers may be enabled to choose from among competing supplies of electricity. Low-income consumers should be provided with supplies from depreciated power stations supplying at low tariffs,

it feels.

The committee believes that “unless the market structure is changed by moving from monopoly supplies to competitive supplies of electricity, which is consistent with the prevailing industry structure in developed countries, the power sector may continue to be unsustainable”.

The committee submitted an interim report to the Centre in late 2012.

The committee, sources said, may also recommend constitution of a high-level task force under the chairmanship of a deputy governor of RBI to formulate measures to restore the health of power projects facing financial headwinds due to scarcity of fuel. What it has in mind is suitable relief to these projects in terms of debt service obligations. As for idle power plants, the panel is understood to be of the view that the fixed charge should be apportioned in such a way that “the project developers do not face bankruptcy, and at the same time, the distribution utilities are not compelled to bear any undue burden”.

The Parekh committee comprises Uday Kotak, GMR Rao, Sanjay Reddy and top officials from Life Insurance Corporation, State Bank of India, ICICI and IDFC.

Sumit Jha | The Financial Express

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