PMEAC review of the economy-I: Council moots new dose of power reforms

The Prime Minister’s Economic Advisory Council (EAC) wants the Centre to unveil new

package of incentives-linked electricity reforms for the States.
8The EAC has contended that it is pertinent that the Government of India come out with a

clear incentive linked plan to persuade the States to reform their electricity utilities.
8In its report titled ‘Review of the Economy 2011-12' released on February 22, the council

has pointed out that the power sector deficits have shown a substantial increase due to the

non-revision of tariffs and also partly because the States have not disbursed subsidies due

to power utilities.
8Recently, Tamil Nadu and Rajasthan have increased tariffs sharply, but the problem of

losses continues to be a concern. Some estimates have put the losses at over 1 percent of

GDP.
8Pertinently, electricity tariffs are also overdue for resetting in many States and there

has been a sharp increase in the fuel component of electricity generation. Thus, on the

energy price front it is only reasonable to expect further upward price adjustments, the

council has said.
8On the positive side, the EAC has noted that the electricity generation sector has

performed well in the current financial year.
8Electricity generation has grown rapidly, averaging 9.4 percent in the first nine months

of the year on account of more capacity coming on line, better fuel availability with

nuclear power plants and improved hydro-resource position.
8However, generation growth in January (4.1 percent) and the first week of February 2012

has been slower on account of fuel-related reasons, especially in gas based plants and for

the year as a whole will be less than in the first nine months. Here again the advance

estimate of 8.3 percent for the electricity and utility sector is likely to be an accurate

reflection of what would turn out to be for the full year, the EAC has said.