January 2020

The year 2020 has begun on a note of cautious optimism for the power sector with some positive policy signals.

There has been news of the government’s intention to launch another bailout scheme for the state discoms in the upcoming budget. The scheme is expected to provide a Rs 1.1 trillion grant to the state discoms. It would be aimed at reducing AT&C losses to less than 12 per cent, reducing tariff gaps and making prepaid smart metering compulsory across the power distribution chain, including 250 million households. The scheme also envisages privatising discoms, with multiple supply franchisees for power distribution in an area and a network franchisee. Discoms would also be eligible for funding against project milestones if all the conditions have been met.

Another positive news development pertains to the government’s plans to launch a scheme for reviving stressed gas-based power projects aggregating almost 24 GW. The schemes include procuring 2,000 MW of power from gas-based plants through auctions and bundling it with an equal capacity of solar power. Another 2,000 MW would be procured through online reverse auction, on a model similar to previous such schemes.

Meanwhile, towards realising the $5 trillion economy dream by 2025, the government unveiled a National Infrastructure Pipeline plan with Rs 102 trillion worth of infrastructure projects. Of these, projects worth almost Rs 21 trillion are envisaged for the power and renewable energy sectors alone. Further, the government’s proposal to waive the coal cess is expected to lower generation costs for thermal plants and thus create more headroom for them to invest in emission control equipment.

What reforms lie in store for the power sector in 2020 and whether these initial positive signals can help improve the grim outlook for the sector owing to several issues on the generation and distribution fronts such as NPAs, low demand and PLFs, outstanding dues from discoms are trends that will be closely tracked by the industry in 2020.

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