Powering The Energy Sector

Context: In an energy-dependent country like India, the availability of energy supplies at affordable rates is pivotal for fulfilling developmental priorities.

Issues associated with power distribution sector

• High losses: High aggregate technical and commercial (AT&C) losses, leakages etc.
• Governance issues: Expensive long-term power purchase agreements, high level of state interference, inefficient operations, heavy cross subsidies etc.
  • Weak State-level tariff policies: Anti-market populist pricing.
• Infrastructure gap: Not upgraded according to modern demands.
• Slow adoption of renewables: Relatively slow progress with an estimated installed capacity of 5-6 GW as on date.

Way forward:

• Economic reforms – Dismantling state monopoly: Through the process of de-licensing power distribution.
  • Open power purchasing from the open market should be implemented across States and barriers like cross subsidy surcharge, additional surcharge and electricity duty being applied by States should be reviewed.
  • Privatisation of discoms: Enable entry of private companies in distribution, that will result in increased competition.
  • Eg: In Delhi, privatisation of discoms has reduced AT&C losses significantly from 55% in 2002 to 9% in 2020.
  • Competition: Consumers shall choose discom, just as they choose telecom providers.
• Governance reforms – Towards autonomy: Tariffs shall be revised without interference from States.
  • Electrical energy should be brought under GST, with a lower rate of GST, as this will make it possible for power generator/transmission/distribution utilities to get a refund of input credit, which in turn will reduce the cost of power.
  • Installation of smart meters and smart grids which will reduce AT&C losses and restore financial viability of the sector.
  • Streamlining legal complexities: By appointing a member with a legal background in every electricity regulatory commission and strengthening the Appellate Tribunal for Electricity.
  • Push for renewal energy: Encourage roof-top solar plants, enforce purchase obligations etc.