Draft National Electricity Policy Overview
The government has released a draft of a new policy for the power sector, projecting an investment need of ₹50 trillion by 2032 and ₹200 trillion by 2047. The policy aims to implement ambitious reforms in generation, transmission, and distribution to make the sector financially viable.
Key Objectives
- Increase Per Capita Power Consumption: Target of 4,000 kilowatt-hour per capita by 2047.
- Promote Competition: Increase competition in supply and enhance non-fossil capacity.
- Address Financial Viability: Distribution companies have accumulated losses of ₹6.9 trillion with outstanding debt at ₹7.18 trillion.
Proposed Reforms
- Distribution Sector Changes:
- Phase out monopoly by allowing multiple players in the same supply area.
- Promote public-private partnership and list distribution utilities.
- Tariff Reforms:
- Issue tariff orders before each financial year and ensure true-up orders are within the current financial year.
- Separate distribution and supply tariffs with proceedings concluded within 120 days.
- From FY 2026-27, ensure tariffs reflect costs without creating regulatory assets and link to a suitable index for automatic annual revisions.
- Progressively recover fixed costs through demand charges and pass power purchase cost increases to consumers monthly.
- Investment in Non-Fossil Infrastructure: Establish energy sector funds under the National Bank for Financing Infrastructure and Development and the National Investment and Infrastructure Fund.
Implementation Tools
- Enhance project bankability through risk-mitigation instruments like first-loss guarantees, reserve funds, and multilateral guarantees from development banks.
Conclusion
The draft policy aims to significantly increase power consumption while ensuring the financial viability of the sector, promoting competition, and phasing out monopolies in distribution. It emphasizes cost-reflective tariffs and investment in non-fossil infrastructure.
