India

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.