Centre may allow higher returns on new power projects: report

Independent power producers setting up new power projects can hope to get better returns on their investments as the centre has now proposed a hike in the rate of return (RoR).

For power distribution companies (discoms), it proposes to bring in a differential rate of return, a Hindu BusinessLine report quoted power ministry officials as saying.
The report said the power ministry is mulling better rates for new projects (where financial closure is yet to be achieved) and different rates for generation and transmission projects.
The revised rates would be applicable for the tariff period from 1 April 2019 to 31 March 2024.
The move is part of the government’s decision to hive off power distribution companies as independent companies and making profits. The implementation, however, has been stuck as the state governments feel this can be implemented only after empowering State Electricity Regulatory Commissions (SERCs) to allow better margins for discoms.
While the draft amendments to the Tariff Policy, 2018 has emphasised the need to assure appropriate returns to the sector nothing has been done to ensure that as power rates have so far been regulated and any move to liberalise tariff structure will only help power rates to shoot up.
At present, the Central Electricity Regulatory Commission (CERC) specifies a uniform RoR on equity for all projects. The SERCs then set tariffs based on this rate of return. The current RoR permitted by the CERC during the ongoing tariff period (2014-2019) is 15.5 per cent.