Power Reforms

Hydro power generation policy may see a positive shift soon, but some actors say the overall direction may end up being discriminatory against the local producer of electricity. 

Basharat Ahmad Dhar’s transfer as head of the Power Development Corporation (PDC) is a clear indication of the continuation of a process. Retiring by the end of this month, he is expected to get a three-year extension. Apart from remaining part of the systems that emerged on energy front, Dhar, a two time power commissioner, has contributed in creating a new transmission and distribution infrastructure under various centrally sponsored schemes.

Though energy remained in focus because of NHPC’s relationship with the state government, there were no major developments on the front. The JV that PDC has agreed with NHPC and PTC on the 49:49:02 basis was finally signed this year. Former J&K Bank chairman M Yusuf Khan is its chairman.

State government seems concerned over the energy deficit and is working on many plans. But it would require a strong and realistic power policy. The government did announce one for micro projects in July but it would require fundamental changes. Targeted at adding around 200-MW of electricity, the policy sets aside micro-projects falling between two and 10 MW for the local investor. All these projects under this scheme would be implemented under built, own, operate and transfer (BOOT) system and would become state property after 35 years.

The policy makes it mandatory for the independent power producers (IPP) to cough up 15 percent of energy as free power plus one percent for local area development fund. The successful bidders will have to pay an upfront premium of Rs 4 lakh per MW for 2-25 MW projects and Rs 6 lakh for 25-50 MWs, and Rs 8 lakhs for projects above 50 MW and below 100-MWs. Unlike earlier the policy, there will be deadlines attached to every project and the terminal value at which the IPP will transfer the project after 35 years shall remain decided at the bidding level.

Tariffs would be decided by the SERC in all cases. The state government would procure 30 percent of the power that below 25-MW units would generate and the state will have the first right of refusal over the balance generation.

But insiders of the sector say the policy is blatantly discriminatory for the local producers. It has even reduced the possibility of certain people actually taking up harvesting water resources on long-term basis. Things will start changing on the power front only after certain fundamental shifts are affected in the policy. At a hypersensitive and unpredictable place, nobody can pre-decide the worth of machinery 35 years ahead, especially when no investment is insured and there is no conflict insurance as well.


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