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Power sector A case for

improvement

Case on Power sector


The very fact that the new government has
integrated the three Ministries of Power,
Coal, and Renewable energy into one,
demonstrates the keenness of the
government to accelerate power sector
growth by not only resolving some of the
complex issues confronting the sector but
also providing integrated and holistic
solutions. Many suggestions have been
floated which may help to improve the
situation in a big way like the few given
below:

1. Income tax benefit under section 80 IA to be


extended to power projects commissioned till the
end of the current five year Plan. The need for
attracting investments, including FDI, in power
sector continues.
2. Considering the huge gap between demand and
supply of domestic coal, and to keep the price of
power within limits, zero import duty on coal until
at least next three years when domestic coal may
be expected to bring down import substantially.
3. A power distribution reform scheme with
substantial incentive to state utilities to bring
down the financial loss from present about
`80,000 crore( annual), through integrated actions
on theft control, tariff rationalization and overall
efficiency. Under an overall framework, state
specific package linked to predetermined
outcomes will be needed.

4. A five year programme for 24 by 7 power supply with


progressive targets for next 2, 3 and 5 years. Budgetary
and incentive support for the same would be necessary,
but those should be linked with targeted actions by each
state.
5. Coal sector reform is overdue. Specific reform initiatives,
with incentivized schemes, aimed at a minimum 10 per
cent growth in domestic coal production through public
sector as well as PPP mode. Coal regulator with statutory
power, and new Coal Act are important initiatives which
may be done without any further delay.
6. Hydro power proportion has declined drastically in last
few years. Special package to restore the balance e.g.
higher return on investment, longer term tax exemption,
longer tenure loan.
7. viability gap funding for transmission projects particularly
in North East, government supported road networks in
hilly areas and river basins, with hydro project potential
are essential to boost development of hydro projects.

8. Wind power capacity slowed down in last few years.


There is a need to bring back the same on fast track.
9. Accelerated Depreciation benefit for renewable projects
as an option to the generation based incentive.
10.Innovative approaches would be needed to provide
transmission solution to wind and solar projects for their
optimal use and these schemes will need
encouragement.
11.Energy Efficiency and demand side management
initiatives have been very effective. Energy service
companies can play even better and bigger role. Tax
benefit under 80 IA to recognize energy service
companies which could prove very useful in the
fulfillment of mission on efficient use of energy.
12.Clean Energy Fund has to be channelized for meaningful
schemes and projects which could further promote the
cause of renewable energy. This fund could go to a
financing SPV which could raise further fund. Specific
schemes with time bound action programs could be
financed.

13.A Transmission Constraint fund got created as


an outcome of short term power trade and
power exchange operations. This got into
consolidated fund of the government and
nothing worthwhile has happened. This could
also go to a financing SPV which could raise
further fund and finance specific transmission
projects aimed at removing transmission
bottlenecks.
14.It is quite clear that in large parts rural India
decentralized distributed generation ( DDG),
both off grid and grid, could help states to
provide power as also reduce huge technical and
other losses. Viability Gap Funded PPP projects
supported out of savings from losses, by states
as well as also partly supported by GOI could go
a long way to provide power to rural India.

Points for discussion


Express your opinion on the feasibility of
each suggestion. How these can be
enforced and who are involved in the
implementation.
What should be the time frame for
implementation of the suggestions keeping
in mind the risks due to technology
advancement and dependence on imports.
What mix of conventional power and DDG is
suitable for rural development through rural
electrification in our country.
Any more suggestions to improve the power
position.

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