The central government is set to hold a two-day brainstorming session with states on big power sector reforms including direct transfer of subsidy and strict laws obligating distribution utilities to provide round-the-clock power and connection portability.
The bi-annual meet, starting Friday in Rajgir, Bihar, will be chaired by Union power and renewable energy minister R K Singh.
The meeting is expected to ask states to strike a balance between honouring the power purchase agreements (PPAs) and ensuring financial sustainability of electricity distribution companies (discoms).
It will also deliberate on ways to accelerate village and household electrification and promotion of digital payments. “There have been a few cases in the recent past wherein discoms have gone ahead with the cancellation of their long term PPAs.
Similarly, long-term PPAs are not being signed by discoms,” said a note setting the agenda of the meeting.
“Dishonouring of contracts solemnly entered into by state-owned entities also has a negative impact on investor sentiments, including those of foreign investors, given the government ownership of these companies.”
The note said the ability to enforce contracts is one of the main verticals of the ‘ease of doing business’ perceptions study conducted by the World Bank every year.
“Thus, any adverse measure by the state-owned entities in the contractual space may mar India’s position on the ease of doing business rankings. Power sector occupies a relatively big space in the economy and thus this can have a negative influence on FDI inflows in the country,” it said.
The note said there are three types of cases—not signing PPAs after conducting bid, re-visiting old PPAs and cancelling already signed PPAs. “The contractual agreement must be honoured otherwise it will damage the sector very seriously,” it added.
The conference will also discuss measures to transfer benefits from the state in the form of subsidy for power consumption directly to the consumers and restricting cross-subsidy levies by states on industries within specified limits.