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Power reforms: NITI bats for promoting auctions, discoms privatisation, independent regulators

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New Delhi, Dec 19 (PTI) Government think tank Niti Aayog in its strategy document Wednesday suggested for the power sector a plethora of reforms like promoting smart grids, auctioning of energy, privatisation of discoms, payment of subsidies by direct benefit transfer and introducing 100 per cent metering for electric supply, etc. The Aayog unveiled 'Strategy for New India @75' for New India, which defines clear objectives for 2022-23 in a detailed exposition of 41 crucial areas and suggests the way forward for achieving them. It made a case for promoting smart grids and smart meters and also said that all Power purchase agreements (PPAs) including those with state generation companies (GENCOs) should be based on competitive bidding. The Aayog also asked the government to introduce a capacity market to encourage flexible capacity for peak power demand and intermittency. According to the strategy document, privatising state distribution utilities and/or the use of a franchisee model will reduce aggregate technical and commercial (AT&C) losses and discoms (power distribution firms) may adopt a franchisee model for its retail business in rural areas and stipulate a minimum level of performance parameters, including the use of decentralised generation sources and storage systems for local reliability and resilience. On autonomy of power regulators, it said that regulatory bodies need to be further strengthened and made truly independent. For the agriculture sector, the Aayog said that an upfront subsidy per acre of land through direct benefit transfer (DBT) may be considered instead of providing separate subsidies for fertilisers, electricity and crop insurance, etc. It also suggested promoting use of solar pumps for agriculture and said that local discoms should buy surplus power from farmers. On unscheduled load shedding, the Niti strategy document suggested that discoms may be fined for load shedding and the government should ensure effective enforcement of a cap on cross-subsidy and open access. About open access, the Aayog said it is also necessary to remove high open access charges and government should actively promote cross-border electricity trade to utilize existing/upcoming generation assets. It also pitched for introduce time-of-day tariff to promote the use of renewable energy and performance-based incentives in the tariff structure. To manage the demand for power, it is necessary to introduce 100 per cent metering, net metering, smart meters and metering of electricity supplied to agriculture, the strategy paper recommended. On power transmission, it has recommended to provide a mechanism for cost-effective power grid balancing (gas-based, hydro or storage). It said that renewable purchase obligations (RPO) should be strictly enforced and inter-state sale of renewable energy should be facilitated and it is necessary to have national level markets and regulations for balancing of power. Central level agencies like the Central Electricity Regulatory Commission or National Load Despatch Centre should socialise the costs of balancing inter-state transmission systems (ISTS) connected power plants, over the entire system, on the lines of the point of connection (PoC) or a similar mechanism, it said. It said that commercial biogas needs to be promoted by providing subsidy to consumers. On energy efficinecy, the Aayog said that the Bureau of Energy Efficiency (BEE) should come out with a white paper on its 5-year strategy on energy efficiency in various sectors and specify energy consumption norms. It suggested that state designated agencies (SDAs) need to be more empowered and provided with adequate resources to implement EE related programmes. There is a need to ensure greater participation of energy service companies (ESCOs) using appropriate financing models with a risk sharing mechanism, particularly by public sector banks. The document said that states should adopt the second version of Energy Conservation Building Code (ECBC) in their building by-laws and ensure faster implementation. The Niti Aayog also made a case for promoting mandatory use of LED and replacement of old appliances in government buildings with five-star appliances. It further said that the number of appliances covered under the Standards and Labelling (S&L) programme should be increased. It also asked to widen and deepen the perform, achieve and trade (PAT) programme, make Energy Saving Certificate (ESCert) trading under the PAT scheme effective by ensuring strict penalties against defaulters. For the MSME sector, the Aayog said that the BEE should develop cluster-specific programmes for energy intensive industries to introduce energy efficient technologies. It said that the Forum of Regulators and State Electricity Regulatory Commissions (SERCs) should provide for lower heat rate requirements for new power stations. Old and inefficient plants consuming more than the threshold energy should be retired in a phased manner and use of the public transport system should be promoted, suggested the document. Public transport systems may be converted to electric in a time-bound manner and the government should expand the corporate average fuel efficiency standards (CAFE) beyond passenger cars to other vehicle segments, it added. All recommendations are in view of government's goal to make available 24x7 power to all by 2019, achieve 175 GW of renewable energy by 2022 and reduce emission intensity of GDP in a manner that will help India achieve the intended nationally determined contribution (INDC) target of 2030. PTI KKS MKJ

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