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The benefits of the Ujwal Discom Assurance Yojana (Uday) scheme are yet to be felt by the power sector, experts have said. Talking at an event conducted by KPMG here on Tuesday, Prabir Neogi, chief executive (corporate affairs), CESC, said inefficient power purchase models implemented by the state-owned power distribution companies (discoms) have added to their financial woes. The Uday scheme, which comprised debt restructuring of the discoms to lower interest rates, was designed to financially turn around the distribution utilities. The scheme has also set operational targets such as reduction in aggregate technical and commercial (AT&C) losses and annual power tariff revision to improve the finances of the discoms.
Industry veterans who spoke at the event reiterated that discom finances, along with the tepid rise in power demand, were the main reasons behind the woes of the sector, including 60,000 MW of stranded electricity generation assets. Talking at the event, Azure Power chairman Inderpreet Wadhwa said payment discipline is still lacking on part of the discoms, leading to working capital issues for solar power companies like Azure. Schemes like Uday prove that the “government has the intent to solve it,” Wadhwa added.
A report released by KPMG at the event said pockets of successes have started to appear with some states responding to the targets set by Uday, but there is still a long way to go. Talking about financing in the energy sector, PTC India Financial Services CEO Ashok Haldia said “stressed assets have become a part of the lenders’ life”. However, the funding scene would improve if the recent uncertainties about power purchase agreements can be tackled. Addressing a query on the viability of low renewable energy tariffs discovered in the latest auctions, Haldia said no lender was sure about the sustainability of such projects.
The government plans to meet the climate targets under the Paris agreement represents a USD 3.1-trillion investment opportunities by 2030, says an IFC report. The sectors where this investment would come in include renewable energy, green buildings, transport infrastructure, electric vehicles, and climate-smart agriculture, according to a report by the International Finance Corporation (IFC), a member of the World Bank Group. The analysis is part of a regional study that examines the climate-investment opportunities in Bangladesh, Bhutan, India, the Maldives, Nepal and Sri Lanka. These countries together represent 7.38 per cent of global carbon dioxide emissions, the report noted.
“The only way that the South Asian countries can take advantage of these climate investment opportunities is with a strong and engaged private sector,” IFC chief executive Philippe le Houérou said in the report. “We also need to have a comprehensive approach to creating markets for climate business in key sectors. That means putting in place the necessary policy framework, promoting competition, and building capacities and skillsets to open new markets,” he added. India, with a population of 1.3 billion, is the world’s third-largest economy according to purchasing power parity, and with a large, young and growing labor force, the country is a significant market for the private sector.
IFC is strongly committed to supporting the private sector in the South Asia region. Since 2005, IFC has invested USD 2.6 billion of its own funds in long-term financing for climate-smart projects in South Asia and additionally mobilised almost USD 1 billion from other investors.
Industry body Assocham has urged the Centre to fix Goods and Services Tax (GST)rate for hydropower at par with wind and solar so that value added cost and tax commensurate for all renewable power projects. “Hydro projects attract 18 per cent GST for equipment and 28 per cent for cement while the same for solar is made five per cent Engineering, Procurement and Construction (EPC) which has a glaring additional cost impact on power produced from hydro projects,” noted an Assocham paper titled ‘Need for Hydropower in India – Industry Submission.’
It also said EPC contracts for hydro should be categorised under five per cent GST. Currently, electricity at the consumer end or at discom end does not attract any GST and therefore the last leg of consumption of GST is with the generator.
The paper was released by Power Minister R K Singh at an ‘Assocham Round Table Discussion on Hydro Power in India’, here last evening. Assuring the hydro industry players of looking into the demands of the sector, Singh informed that the Centre’s hydro policy was in final stage which would be sent for Cabinet approval within a fortnight. The paper suggested that transmission charges for hydro projects should be energy based. It said solar and wind get freewheeling for approximately 20 per cent plant load factor (PLF) while hydro projects have to pay transmission charges based on capacity. It also recommended that states should waive free power requirement as that would reduce hydro tariff in initial years and make it more viable and competitive.
Besides, the note said hydro projects should be awarded on build, operate and own (BOO) basis for private sector instead on the basis of build own operate and transfer (BOOT). Further, the paper suggested for payment security as given to solar projects to be extended to hydro which also requires firm power purchase agreement (PPA). Though the hydro projects lead to development of remote locations and build a lot of social/enabling infrastructure around them, it burdens the project while same is not with other renewable generation, the paper noted. “Thus social/enabling infrastructure cost should be funded by Hydro Development Fund or National Clean Energy Fund (NCEF) as defined in proposal to Expenditure Finance Committee (EFC) thereby limiting it to indicative list of projects in that proposal,” the paper said. The paper also stressed that an online, time-bound single window approval and clearance should be the mandate for developing hydro power sector and the same may be recommended to all states. “This will facilitate transparency, accountability, efficiency and significantly improve ease of doing business,” it said.
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