InvestorQ : What is the big change that Indian government is planning with its power companies?
Anamika Sodhani made post

What is the big change that Indian government is planning with its power companies?

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Angel dcosta answered.
2 months ago
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The Indian government may be looking at a drastic rehaul of its power policy to boost competition and lower debt at its power distribution companies. However, this could also lead to a spike in the price of power and could become largely unpopular. Some of the proposals being considered include allowing more utilities to operate in the same circle, allowing regulators to set tariffs based on market costs as well as defining payment procedures and deadlines. This bill is likely to be taken up in the current session.

The overhaul, despite being unpopular, is likely to unclog the power sector. The power sector is currently choked with Rs6 trillion of debt and that needs to be quickly unclogged for the sector to make meaningful progress. It could pave the way for big companies to take over the sector, which is the case anyway. Already,the employees of the power sector have threatened to go on strike. This will also allow the private power companies to benefit from the distribution networks of the states and pick and choose profitable distribution circles.

The bill may mandate that regulators set a ceiling and a floor tariff in areas where two or more suppliers operate in a single distribution circle. It remains to be seen how states will fulfil the promise of free power which they use to lure voters. The first signal came when the prime minister exhorted the states to clear unpaid bills of Rs250,000 crore. The farmers lobby, not surprisingly, is opposed to the bill since they have been one of the most prominent beneficiaries of power largesse.

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