The Central Electricity Regulatory Commission has released, draft regulations which will decide the multi year power tariffs for the years between 2014-19.
While this is the draft, it will set the basis of the regulations that will impact all regulated power generating & transmission companies like NTPC, NHPC, Sutlej Jal Vidyut Nigam, Torrent Power etc, whose tariff rates are set to get more cheaper The main highlight of this draft is that power tariffs acc to this, are set to get cheaper.
This new draft is set to remove the tax arbitrage which existed when companies like NTPC charged a higher tax rate from its customers leading to a tax arbitrage for NTPC alont at 500 crore a year. Norms for 2009-14 allowed utilities to retain tax benefits applicable to power projects by recovering higher tax from beneficiaries than the actual income tax paid.
However, the new norms limit the recovery of tax to the actual tax paid by utilities. Tariffs are thus set to get cheaper with lower tax arbitrage. CERC has also changed the Operating and maintenance expenses marginally, which according to analysts was set to increase bringing in relief for power generation companies like NTPC.
However, with a marginal change in the operating and maintenance expenses, companies like NTPC will not see any major relief.
However, low increase in O&M expenses will increase the efficiency of power companies leading to lower tariff rates. This time according to CERC, The incentive structure for generation projects has been changed from earlier plant based (for PAF > normative PAF of 85%) to generation linked. while NTPC is still examining this, and prima facie find it positive, it could mean better and lower tariffs going forward.
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