The National Electricity Policy, cleared by the Cabinet on Wednesday, made a case for providing subsidised power to below poverty line families, and said that capital subsidy would be provided to states for rural electrification, with special reference to Dalit bastis, tribal areas and weaker sections.
For the private sector, it said that return on investment would have to be at par with, if not better than, investment opportunities in other sectors.
However, officials said that the Central Electricity Regulatory Commissions guidelines on returns on investment were to be followed and that the policy was only to guide state regulators.
The policy also focuses on creating adequate generation capacity to ensure that there is a spinning reserve of at least 5 per cent by 2012 with availability of installed capacity at 85 per cent.
An investment of Rs 900,000 crore (Rs 9,000 billion) would be required by 2012 to finance generation, transmission, distribution and rural electrification projects.
"Only projects with electricity tariff in the range of Rs 2-2.20 per unit will be cleared," said Union Power Minister, PM Sayeed.
"The policy clearly makes a case for providing subsidised power to below poverty line families consuming up to 30 units per month. For other categories of consumers, it says that cross-subsidies need to be reduced progressively and gradually," Sayeed said.
The policy also states that cost recovery on service from consumers should be done at tariffs reflecting efficient costs to ensure financial viability of the sector.
Addressing a press conference today, Sayeed said that for other subsidies, the state governments would have to make budgetary provisions and pay the utilities.
No time frame has been specified for the reduction, however, there is provision for a review after five years. Choice of fuel for thermal generation will have to be based on the cost of the fuel, he said, adding that the policy laid emphasis on full development of the hydro potential by making provisions for long-term finances.
To give a boost to the renewable and non-conventional energy market, it states that a percentage of power, specified by State Regulatory Commissions was to be purchased from such sources, as early as possible.
Availability based tariff is to be extended to the State level for better grid discipline through economic signaling, the policy states and it also lays special emphasis on time bound reduction of transmission and distribution losses.
On open access, another issue on which the left parties had raised objections, it says that surcharge levied should not be so oneorus so as to deter competition.
Sops for the poor