The plan comes at a time of investor uncertainty about contracts and delayed payments by state distribution companies.
December 12, 2019
The Centre plans to take a major initiative in the power sector with an ordinance to ensure sanctity of contracts, restrict cross-subsidization of consumers and force utilities to pay their bills on time, a move that can go a long way in making electricity generation and distribution attractive for investors.
The planned ordinance would also deal with crucial issues of independence of electricity regulators and quick finalization of tariffs based on costs – measures that were originally planned as amendments to the Electricity Act of 2003. States have been opposing these amendments for the past 3-4 years.
The proposal comes after the new governments in Andhra Pradesh and Maharashtra refused to honor power purchase agreements, leaving investors jittery. Power minister RK Singh and top officials of his ministries have been asking Andhra Pradesh to refrain from renegotiating renewable power contracts to avoid sending wrong signals to domestic and global investment communities. After the proposed amendment, the parties to power contracts will not be allowed to stop supplying or taking electricity even in case of a dispute, till the time it is settled.
