Economic Survey 2016: Stop cross-subsidies, let industries buy power from markets

NEW DELHI: Indian industries should be relived of the burden of subsidising electricity supply for agricultural and domestic consumers and allowed to procure power from open market, the Economic Survey said.

The survey said the time is ripe to allow industries with higher power demands to absorb excess power generation capacity through open access to energise the government’s Make in India campaign. Open access is a reform announced in the Electricity Act 2003 that refers to enabling buyers to choose the source of electricity and giving them rights on the transmission and distribution system.

Electricity prices for Indian industries are among the highest in world as states offer free power to agricultural consumers and subsidised electricity to homes. States also levy huge charges on spot market power purchases by industrial consumers to protect their power distribution companies.

“Cross-subsidy surcharges and non-price regulatory measures are key tools for balancing distribution companies’ equity and access considerations, but they may also hinder the creation of a nationwide electricity market,” the survey said.