Government lining up big-ticket reforms to energise India's power market

NEW DELHI: The government is lining up big-ticket power sector reforms that will change the architecture of

domestic electricity market

, make it more responsive and reduce cost for distribution utilities as well as consumers through intense competition.


The power ministry has set up an expert group headed by special secretary in the ministry to chart a course for "deepening of power markets in India". Simultaneously, the ministry has also appointed consultants EY (Ernst & Young) to suggest ways to bring alive the

power market

by identifying the voids in the current system.

The reforms push, potentially the biggest since the enactment of the

Electricity Act

of 2003, has been initiated as part of power minister

RK Singh

's efforts to lay a roadmap for a thriving domestic power market by 2030 to ensure the Narendra Modi government's objective of providing 24X7 affordable and quality power.

"We are going to bring about a wholesale change the way we approach the power market. The idea is to make the sector more responsive and viable so that investments can come. Make it accountable to consumers on quality of service. Giving rights to consumers. Deepening of market is to create competition and encourage efficiency and flexibility," Singh told TOI on Wednesday, confirming the ministry's move.

The broad contours of the current exercise revolves around encouraging discoms to buy bulk of the power through trading platforms, just like in developed markets such as Europe. This will bring about several changes down the the value chain. Generators will optimise their capacity and source - coal, hydel, renewables - and compete to offer lower tariffs. This will reduce the cost of power purchase for discoms, who will have to manage the demand-supply slate more efficiently and be nimble to be able to tie up cheaper power when on offer. Trading is also expected to address the issue of delayed payments to generators by discoms, improving vibaility in the sector.

Most of the building blocks for this phase of reforms are already there: India is near-surplus in generation capacity and has a decade of operating power exchanges. Utilities and generators were given flexibility to use their coal linkages at more efficient plants. Recently, Singh allowed flexibility to generators to supply from any plant of their choice instead of the plant designated in a PPA (power purchase agreement. To ensure timely payment to generators, he used PPA provisions to introduce a pre-paid system for discoms.

On the consumer side, pre-paid meters are being rolled out. There is plan for introducing time-of-the-day tariff and open access for large consumers by separating carriage and content. Large-scale trading will bring all these together to turn India into a viable, thriving power market.