Union Cabinet approves National Tariff Policy to boost investment, clean energy

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The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi  has approved the new power tariff policy to ensure 24X7 affordable power as well as to promote clean energy and achieve the objectives of Ujwal DISCOM Assurance Yojana (UDAY) with the focus on 4 Es.

The 4 Es are :

  • Electricity for all 
  • Efficiency to ensure affordable tariffs
  • Environment for a sustainable future
  • Ease of doing business to attract investments and ensure financial viability

Electricity for all :

  • The policy aims at providing 24X7 power supply to all consumers for which state governments and regulators will devise appropriate power supply trajectory to achieve this. 
  • Micro Grids  will provide power to  remote unconnected villages. The micro grids will have provision for purchase of power into the grid.
  • Small plants will be set up in coal mining areas to provide power to people living near coal mines.

Efficiency to ensure affordable tariffs :

Power plants run on low PLF or generate less power than their installed capacity because state do not buy the committed power which results in underutilisation of plant capacity so to cover the overall expanses the company increases the fixed cost component in the power tariff which ultimately hits the pocket of the consumer but now under the new policy  plants will be able to sell power generated from this spare capacity on energy exchanges which will boost up overall efficiency of the power plant.

  • The new tariff policy also provides for faster installation of smart meters which will enable Time of Day metering, reducing theft and allowing net-metering.
  • It also aims at lowering power cost by creating transmission capacity for accessing power from across India.
  • The transmission projects will be developed through competitive bidding process which will ensure faster completion of lines at lower cost.

Environment :

Renewable Power Obligation (RPO) : The new tariff policy provides a provision of Renewable Power Obligation (RPO ) under which by March 2022, 8% of electricity consumption shall be from solar energy in order to promote renewable energy and energy security

Renewable Generation Obligation (RGO): New coal/lignite based thermal plants after specified date will establish/procure/purchase renewable capacity.

  • It provides affordable renewable power through bundling of renewable power with power from plantswhose PPAs have expired or completed their useful life.
  • The policy will also give big boost to Swachh Bharat Mission as it provides for procurement of 100 percent power produced from Waste-to-Energy plants.
  • Thermal plants within 50 km of sewage treatment facilities will use treated sewage water which will help in releasing clean drinking water for cities and reduce pollution of rivers like Ganga

Ease of Doing Business :

  • The policy provides for generation of employment in coal rich Eastern states like Odisha, West Bengal, Jharkhand, Chhattisgarh etc. by encouraging investments.
  • The policy allows pass through for impact of any change in domestic duties, levies, cess and taxes in competitive bid projects for removing market uncertainty
  • States will be allowed to setup plants, with up to 35 percent of power procured by DISCOMs on regulated tariff.
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