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State governments make it tough for private cmpanies to bag parallel power licences.

Date: 28-03-2016
Subject: State governments make it tough for private cmpanies to bag parallel power licences
KOLKATA: Parallel power licences were allowed under the Electricity Act of 2013 but getting them isn't easy with state governments appearing to regard applicants as competition for their own utilities, say private operators.

Such permits allow power companies to distribute electricity to consumers seeking an alternative to the utility that's licensed to service the area. Depending on expertise and subject to approval, private power companies can distribute power and usually at a lower cost than state utilities as their aggregate technical and commercial losses are less. In this regard, private firms have been targeting industrial consumers — the bulk customers who contribute a majority of revenue and typically subsidise household consumption.

"Private players applying for distribution licences have turned out to be major potential competitors to state distribution companies which have been reeling under financial stress," a senior power sector official said. "Under such circumstances, if the premium customers are taken away, the utilities will have to rework their subsidy pattern as bulk customers in most cases subsidise retail consumers."

India Power is seeking to enter retail power distribution in the industrial hubs of East Midnapore in West Bengal and Gurgaon. That makes it a possible rival to the government-owned power distribution companies in those states.

The application for Gurgaon was rejected by Haryana Electricity Regulatory Commission (HERC), prompting the company to move the appellate tribunal. Its application for East Midnapore has been up for public hearing a number of times, a final decision is yet to be taken. "We had applied for Gurgaon on January 9, 2014, while for East Midnapore it was November 30, 2015," said Hemant Kanoria, chairman, India Power.

Applications for parallel licences are submitted to the state electricity regulatory commissions, members of which are selected by the state governments, said Arvind Mahajan, head of infrastructure and government services at KPMG.

"A possibility of regulators getting influenced in favour of the state utility cannot be totally ruled out," Kanoria said. "At present, power regulators in different states are at different levels of maturity although Bengal is at higher level of maturity than many other states."

The concept of parallel licences seems to be flawed, Mahajan said. "Under the present set of norms, the licensee would have to lay separate power lines to connect consumers," he said. "However, since there is already a set of such lines laid by the (existing) distribution company, laying another set of wires to home would lead to sub-optimal usage of infrastructure."

In the recent past, private units of DLF and the Essar Group have had to shelve parallel distribution plans in Haryana. JSPL has received a parallel licence for an area near Raipur and Torrent has one for the Dahej special economic zone (SEZ) as co-developer.

Source : economictimes.indiatimes.com

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