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Economic Survey 2017-18- Tariff renegotiation, judicial delays threat to power sector

Economic Survey 2018: The finance ministry’s Economic Survey tabled in Parliament on Monday identified judicial delays and power-tariff renegotiation as some of the areas potentially hurting investment in the renewable energy sector. The Survey reiterated the relevance of using the direct benefit transfer (DBT) to dole out subsidies to the needy section and curbing wasteful consumption and emphasised investments and advocated investments in energy-storage systems to avoid import dependency.

The Survey also claimed that power companies gained from the current economic scenario with a stronger rupee and lower interest rates. The survey said that as many as 11 power ministry projects, worth Rs 23,913 crore, are currently stayed by court injunctions, for an average duration of three years. Judicial delays lead to a number of complexities in ‘Ease of Doing Business’ and raise project costs, mostly debt-financed, by about 60%, it noted. The survey suggested coordinated action between the government and the judiciary to boost economic activity in the country.

The survey acknowledged the recent phenomenon of tariff renegotiation by cash-strapped state-owned power distribution companies (discoms) which have pledged to reduce their power procurement expenses under the Ujwal discom assurance yojana (UDAY) scheme.

Some discoms started to renegotiate electricity tariffs, mutually agreed in power purchase agreements (PPA), with independent power producers after new record low rates of solar and wind-based power through competitive bidding. Citing a Crisil report, the survey pointed out that renegotiating the tariffs could result in risk for investments worth Rs 48,000 crore.