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Indian Economy

Panel on Power Reforms

  • 26 Aug 2019
  • 2 min read

The Centre has formed a high-level group to make recommendations for changing the structure and system of power sale and purchase in the country.

  • Led by the Special Power Secretary - Sanjiv Nandan Sahai, the group will recommend reforms needed in Power Purchase Agreements (PPAs) and for increasing competitiveness in the power markets.
  • The Panel has been given six months for submitting its recommendations.

Problems within the Power Sector

  • Power sector has witnessed a huge growth in terms of capacity addition during the last few years but it is reeling under stress as the mismatch in demand and supply, has led to stressed power assets or non-performing assets (NPAs).
    • About 34 power plants in the country amount to about ₹1.40 lakh crore NPAs.
  • Reasons behind huge NPAs: Capacity addition without tied-up PPAs with Distribution Companies (DISCOMs), coal supply issues, the inability of DISCOMs to pay to generators, regulatory issues, the inability of promoters to infuse equity, tardy implementation etc.
    • Power distribution companies have historically entered into long term PPAs with the generating firms for the supply of power and appropriate regulatory commissions determine tariffs.
  • Volatility of Prices in Power Trading: The power procured from power exchanges consists of around 3-4% of total power procured in the country. The comparatively smaller proportions of power procured through power exchanges result in lower depth and higher volatility of power prices in the power exchanges.

Source: HT

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