CHANDIGARH:Privatise distribution in select Punjab cities, shut down two thermal plants and
single part tariff for the industry are the recommendations of the group of experts
led by Montek Singh Ahluwalia to develop a post-COVID medium-term and long-term economic strategy for Punjab.
The report has suggested that there is a case for experimenting with privatisation
of distribution in selected cities in Punjab. It would be a good way of attracting major investors into Punjab and industry will benefit from lower tariffs in the longer term.
The report suggests that to reduce the average cost of power to the
Punjab State Power Corporation Ltd.(PSPCL) two thermal plants at Ropar and Lehra Mohabatt that produce power at a much higher cost than alternatives available to PSPCL should be shut down once they complete their life span. Two units of Ropar thermal plant have already been closed and the remaining 4 units have outlived their life span of 25 years as the last unit no. 6 was commissioned in 1993.
The report has suggested that the two-part tariff for the industry may be modified.
As a relief to the industry, it may be given an option of choosing between single-part tariff and two-part tariff. This will load the PSPCL with higher costs,
but that is a more reasonable outcome. The additional amount could be treated as “regulatory capital” and recovered through higher tariffs in the future.
The effective cost per unit for the industry is Rs 7.2 per unit and this cost increases
if industry is not operating on full capacity.
Punjab’s policy of free power for agriculture has led to an unsustainable burden on the budget and damaging environmental consequences because of excess use of water. Furthermost of the subsidy accrues to larger farmers. The reforming electricity tariffs for agriculture is a politically difficult decision and it should be taken in the future.
The other reforms needed are to reduce aggregate technical and commercial (AT&C) losses,
converting the subsidization of agricultural consumption of electricity into direct benefit transfers, and reducing the gap between average cost and average revenues. These will help PSPCL in getting additional loans.