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Centre wants power subsidy by direct benefit transfer

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Power Minister R K Singh wants cap on cross-subsidies, with supply to be legal obligation from early 2019

Shreya Jai  |  New Delhi  Last Updated at December 7, 2017 19:40 IST

The central government will push for (DBT) of electricity subsidy, as with cooking gas, in the states.

It would also like states to reduce cross-subsidy charges to 20 per cent for industrial and commercial consumers, R K Singh, the Union minister of state for power, said.

He was speaking at the All States Power Ministers Conference. DBT would, he said, make for a more competitive sector, beside helping to control a rise in supply rates.

DBT in power was introduced by the government of Bihar this year, while raising rates by 25 per cent across all slabs. DBT was introduced subsidy for some poorer sections and farmers.

Singh said the Centre has urged all states to reduce the number of billing slabs and cap the cross-subsidy charge for industries at 20 per cent, as proposed in the National Tariff Policy-2016. Currently, there are as many as 60-90 slabs in some states. The aim is to curtail these to 12-15.

Business Standard had reported earlier that the Centre was looking at ways to usher in ‘pay as you use’. This entails changing the method of calculating rates, setting standards and optimising the high price paid by industries.

“For giving a push to ‘Make in India’ and domestic industrialisation, we have to make quality power affordable for all and all states have to ensure that Power Purchase Agreements are honoured, tariffs (rates) are sustainable and the element of cross-subsidisation remains below 20 per cent,” said Singh.

Cross-subsidy charges are levied by distribution companies (discoms) on heavy buyers, such as manufacturers and commercial users, to recover their cost of supply in giving subsidised power to others. Industries are also allowed to purchase from outside the state their units are in and in the spot market – the ‘Open Access’ category. The subsidised population are mostly in rural areas and poorer sections.

Open access is supposed to be allowed for all but this is yet to happen. It is also proposed that this be made free of any additional charges, to entail a uniform power market across the country.

To allow multiple power suppliers in a state and allow choice to consumers, Singh said separation of content and carriage had been proposed as an amendment to the Electricity Act. The separation would entail more than one power supplier in a single region.

“To decrease the losses of the discoms and make them viable, the Union government is proposing to do away with human interface in meter reading and billing of consumers. Mandatory installation of prepaid meters for small consumers and smart meters for large ones, with every connection in the future in each state, would prevent corruption and increase compliance in bill payments,” said Singh.

Also, that ’24×7 supply’ would be an obligation for states from March 2019. “Any default would lead to penalty. We would move a note to make power supply a legal obligation. Quantum of penalty is under discussion with states,” he said.

Ministers from Andhra, Arunachal Pradesh, Assam, Chhattisgarh, Goa, Haryana, Jammu & Kashmir, Jharkhand, Karnataka, Kerala, Manipur, Nagaland, Odisha, Sikkim, Tamil Nadu, Telangana, Uttar Pradesh and Puducherry were present, as were heads of public sector undertakings in the sector.

First Published: Thu, December 07 2017. 19:06 IST

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