The new national power tariff policy approved by the Union Cabinet is a step forward in power reforms. The sector needs reforms in all areas of production, distribution and consumption. These are mutually connected and so reforms have to embrace all of them to be effective. Union Minister for Power Piyush Goyal has been active on reforms and has introduced policies that have shown positive results. The working of Coal India has improved, power shortages have reduced and renewable energy plans have got a boost in the last few months. The plan announced by the ministry to improve the finances of the discoms was well conceived. The new tariff policy may be seen as an extension of these reforms and if well implemented, it can help the sector to tone up.

The policy is expected to benefit all stake-holders like generators, utilities and consumers. Power companies will benefit because they will now be allowed to pass costs arising out of changes in taxers, cesses and levies on to consumers. That can boost investor sentiment. One other major highlight is that power plants in operation will be allowed 100 per cent expansion. Greenfield expansion may be easier and can cut costs of production. Power generators can sell their surplus power on the power exchange and share the proceeds with the state government. This can help boost production. It is also a sound financial step. The policy proposes to enable power consumers to become producers too. It is also proposed to offer differential tariffs for different times of the day. With the use of smart meters, consumers can regulate their consumption and save on electricity bill by reducing consumption during peak hours. But the usefulness and feasibility of the proposal may have to be tested in practice. It may however be possible to reduce power theft.

Another important aspect of the policy is the importance it gives to renewable energy. This is part of the overall energy policy and is welcome. The policy aims to provide round the clock power to all, to supply it to even remote villages and to attract more private investment in transmission through competitive bidding. But the success of the policy will lie in the states’ readiness and ability to accept and implement the proposals. Goyal says the policy is based on four E’s – electricity for all, efficiency, environment and ease of doing business. The policy will draw attention even without such alphabetical exercises of the Modi kind. It deserves to be given a fair trial, and it can rid the sector of some of its old maladies.