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State power reforms get further impetus - Views on News from Equitymaster
 
 
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  • Mar 24, 2000

    State power reforms get further impetus

    New guidelines have been announced for sharing of power between the central and state utilities. These are to be linked to the power sector reforms undertaken by the states for all the new central power projects to be set up.

    Under the new guidelines the states will have to sign power purchase agreements with central utilities and make payments upfront. The states which undertake reforms will benefit by getting the unallocated portion of power from the Centre.

    The new guidelines will not affect the existing distribution formula and this will continue. Under the existing formula for thermal and nuclear power plants : 75% of the capacity of the central power generating projects such as those promoted by National Thermal Power Corporation and Nuclear Power Corporation is allocated to the states in the region, 10% of power to the home state and the rest 15% is left to the discretion of the centre. This formula varies slightly for hydel projects.

    The framework of the earlier formula will continue for the new central power projects. Those state electricity boards (SEBs) which are able to undertake power reforms swiftly will be the ones to benefit as they will be entitled to power from the unallocated power portion of the central power projects now. This would provide an incentive to state governments who undertake the power reforms more seriously than others. States that have been proactive towards unbundling of their SEBs and have taken measures to divide their functions into separate corporations are UP and Orissa. Other state governments who are finalising plans of splitting the functions of SEBs are Gujarat and Maharashtra.

    This move will provide an impetus to the power sector reforms which have been progressing very slowly. The government's and the power ministry's efforts are towards making the SEBs more viable. This will make the power sector more attractive for private participation and would encourage Independent power producers (IPPs) as they would be more comfortable dealing with SEBs in future. This would increase the interest levels of foreign and private power companies in investing in power projects.

     

     

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