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In a move that could finally open the power market in India, Prime Minister Manmohan Singh has asked the Cabinet Committee on Economic Affairs to decide on a Planning Commission proposal to allocate a portion of power generated from Centrally-owned utilities for open access to large consumers.
Open access allows large users of power -- typically consuming 1 Mw and above -- to choose their electricity supplier, a move expected to introduce more competition in transmission and distribution and enhance efficiencies in power supply for consumers.
The Electricity Act of 2003 had assigned the deadline of January 27, 2009, for grant of open access to all consumers with electricity requirements of above 1 Mw.
To date, applications seeking open access for over 17,000 Mw have been submitted, but implementation has been as low as 1,600 Mw. That, too, largely for captive power, according to the latest data from the Central Electricity Regulatory Commission.
The Cabinet committee has been asked to discuss the Planning Commission's proposal to set a fourth of the government's quota of unallocated power for open access. The proposal was opposed by the ministry of power earlier this year, fearing loss of its control over allocations.
Unhappy with the opposition from the ministry, the Planning Commission had sought intervention from the Prime Minister's Office. "The PM has said this matter will now be resolved by the CCEA," confirmed a senior Planning Commission official.
The power ministry has discretion in the allocation of 15 per cent of the overall power produced by generating utilities owned by the Centre. This amount of unallocated power is generally used by the government to bridge the gap of demand and supply when a state faces large electricity deficits.
India generates around 700 million Mw of power annually, of which the central generating stations account for 43 per cent, or 300 million Mw. If the Cabinet committee accepts the Planning Commission's proposal, some 75 million Mw of power will be available for sale through open access.
One of the stumbling blocks for open access is the high cross-subsidy surcharge, which is the amount paid by a consumer switching his electricity supplier to his existing supplier, to offset the loss incurred by the exiting supplier on this account.
"The state regulators have fixed cross-subsidy surcharges that are so high that it becomes difficult for the consumers to change their supplier," said a Planning Commission official.
There are divergent views also on whether setting aside some power for sale through open access is a solution to the problem.
"The central government's quota of unallocated power is not sufficient to meet even the existing shortages of power. If we take away more power (from the quota), we are causing more hardships in availability," said another official.
