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India invokes special powers under Electricity Act to enable open access

According to reports, the government has invoked special powers under the Electricity Act and directed the central and state regulators to implement a long-pending reform to allow industrial consumers to buy cheaper power from the open market.

The move will help 15,000 large consumers particularly the sick textile, cement and steel industrial units in states like Punjab and Tamil Nadu by ensuring regular supply of electricity at competitive rates and boost business of power bourses and 52 power traders including NTPC, PTC India, Tata Power, Reliance Infrastructure, Jindal Steel, Essar Power, JSW Energy, GMR Energy and Indiabulls.

 Power secretary P Uma Shankar said the decision was taken because similar directives in the past were taken lightly by regulators. “The ministry has issued letters to regulators to prepare regulations in line with communications sent earlier,” he told ET.

“…the ministry of power, govt of India, in exercise of powers under section 107 of the Electricity Act 2003 hereby issues direction to the central commission to take all necessary steps, including framing of appropriate regulations to implement the provisions of open access…,” the power ministry said in a directive issued on Monday.

Section 107 authorises the government to issue final and binding policy directives to central electricity commission in public interest. Central Electricity Regulatory Commission chairperson Pramod Deo said regulations were already there for inter-state transfer of power.

Traders and large consumers lauded the move but said issues remained with state machinery that have been impeding implementation of the ‘open access’ reform, introduced in Electricity Act 2003 as a powerful tool to induce competition in power sector.

Open access refers to enabling buyers an option to choose source of electricity and giving them right on transmission and distribution system for transfer of power. Distribution companies that fear losing their high paying industrial consumers are impeding implementation of the reform despite directives from power and law ministries asking regulators and distribution companies to set free large industries consuming more than a megawatt of power.

Tariffs for industrial consumers in India are among highest in the world while supply to sectors like agriculture remains highly subsidised. Many states impose huge charges like cross subsidy, transmission, transmission losses, wheeling, wheeling losses charges on open access consumers to discourage industrial consumers buy from elsewhere. An IIT-Delhi study shows distribution companies will earn 10% more revenue if they prudently exclude a portion of large consumers.

NTPC Vidyut Vyapar Nigam, power-trading arm of the company, said it was a good beginning to ensure reliable power to industries provided they have the requisite infrastructure.

Country’s largest power trading platform India Energy Exchange’s managing director and chief executive officer Jayant Deo said it was a welcome move. Manikaran Power Ltd executive director Amit Ailawadi said, “The opinion is a welcome step but needs to be implemented properly at the distribution companies’ level which are opposing it tooth and nail.”

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