June 2022

Over the course of the last month or so, several pertinent policy and reform measures have been taken in the renewable energy and power distribution segments. Marking a paradigm shift in green open access, the Ministry of Power notified the Green Open Access Rules, 2022, which have lowered the limit for green open access transactions from 1 MW to 100 kW. These rules also provide for faster approval of green open access and uniform banking solutions, and are expected to drive the adoption of renewable energy options among commercial and industrial consumers to meet their energy requirement.

In another development, the MoP has notified a bidding trajectory for offshore wind. It entails bidding out 4 GW of offshore wind energy blocks off the coast of Tamil Nadu and Gujarat per year for a period of three years, followed by 5 GW of offshore wind bids every year for a period of five years up to 2029-30. This will help elevate industry sentiment in the offshore wind energy segment, which has witnessed sluggish growth so far. Overall, these developments in the renewable energy space will push forward the country’s clean energy transition and renewable energy development goals.

In the power distribution segment, the MoP has allowed the discoms to clear outstanding dues along with late payment surcharge in equated monthly instalments of 12-48 months. The new rules aim to tackle the issue of mounting discoms dues, which have been affecting the financial position of the power sector. As per the PRAAPTI portal, accessed on June 28 2022, the discom overdues stood at Rs 1,042 billion, and have consistently remained at over Rs 1 trillion in the past 12 months. The new rules are expected to bring the much-needed cash visibility in the segment, as well as promote payment discipline among the power discoms and provide them relief from the accumulation of LPS.

That said, timely payment of instalments by discoms remains linked to improvement in their financial position. This requires long-overdue structural changes in the segment such as improvement in operational efficiency, timely tariff revisions, electricity bill payments by government bodies and subsidy payouts. Further­more, the implementation of projects under the Revamped Distribution Sector Scheme are key to improving discom efficiencies going forward.

The InFocus section this month on “Power Distribution” throws light on the re­cent developments in the segment, key policies and reform measures, as well as issues and challenges facing the segment.