With an aim of unleashing fresh set of reforms for the sector, the Power Ministry is drafting a Cabinet Note proposing amendments to the Tariff Policy, which would enable greater competition and create feasible conditions in the sector. This cabinet note is likely to be prepared in another week i.e. January 15, 2015.
As a part of procedure, the Power minister after seeking responses from other concerned ministries on the draft note would send the final note to Cabinet for approval. Stakeholders like Central Electricity Authority (CEA), Central Electricity Regulatory Commission (CERC), principal secretaries of all the state governments and chairpersons of power generation, transmission and distribution utilities reportedly are expected to submit their feedback on the same.
Reports suggest that the ministry, as part of the amendment to the Tariff Policy, has sought extension of Section 62, under which electricity regulatory commissions posses the power to determine tariffs - beyond the financial year 2017 and keep the hydro projects under this section, enabling the continuation of the cost plus tariff structure.
Under the cost plus tariff structure PSUs, like NTPC and NHPC charge cost plus tariff, a lump-sum fee as well as a per-unit charge from the distribution companies or discoms. Additionally, another suggestion is to have a formula which would ensure that variation in fuel and power purchase cost is recovered by the power generating firms. The earlier amendment to the Tariff Policy was approved in 2011.