US-based investors want slackening of the regulatory regime in India’s power sector and see lowering of tariffs in the renewable energy segment as a threat. The sentiments of the US-India Business Council (USIBC) echo the belief of many experts that aggressive bidding has pulled solar and wind tariffs down to unsustainable levels amid rising interest rates and the end of quantitative easing by the US. Weakening of the rupee is likely to raise the cost and reduce the flow of cheap capital into the sector.
Though the government allows 100% FDI in the power sector, the pricing and tariff determination for generation, transmission and distribution is controlled by government regulators. USIBC, a bilateral trade body, told FE that “the current investment climate in India can be improved further by reducing regulatory barriers to market entry, particularly in the transmission and distribution sectors”. The draft national energy policy published by the NITI Aayog last year cited the absence of commercial pressure on electricity distribution companies (discoms) as one of the fundamental factors for their financially frailty, and suggested passing on sale of electricity to private agents through separation of ‘carriage and content’. Read More