The Hindu Business Line : Expert group calls for rationalising fuel taxes — Moots trade parity pricing for primary energy sources

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Expert group calls for rationalising fuel taxes — Moots trade parity pricing for primary energy sources

Our Bureau

New Delhi , Dec. 15

THE draft Integrated Energy Policy has recommended rationalising the taxes on fuels and trade parity pricing for primary energy sources.

"Pricing of various fuels should not be done independent of each other... All commercial primary energy sources must be priced at trade parity prices at the point of sale," the draft prepared by the Expert Committee on Integrated Energy Policy has said.

The expert group, headed by the Planning Commission Member-Energy, Mr Kirit Parekh, has said that relative prices play an important role in choice of fuel and energy form for the future and that the Central and State taxes on these should be rationalised to yield optimal fuel choices and investment decision.

Integrated regulatory framework

As a step in this direction, the panel has suggested the need for an integrated regulatory framework at the Central level across the entire energy sector.

The report notes that for India to deliver a sustained growth of 8 per cent through 2031, the country's primary energy supply has to grow 3-4 times and electricity supply by 5-7 times of today's consumption. Along with the quantity, the quality of energy supply has also to improve. "The energy challenge is of fundamental importance to India's economic growth imperatives," the draft, which would be placed on the Commission's Web site for comments from across stakeholders, said.

Encourage coal imports

The draft policy also calls for encouraging coal imports, besides giving blocks under Coal India Ltd to other entities for production by 2011-12. "We need to facilitate coal imports... Imports also put a competitive pressure on domestic coal industry to be efficient. Imported coal is far more cost-competitive to imported gas for power generation," it said.

Noting that coal would continue to remain India's primary energy source till 2031-32, the report has said that domestic coal production should be stepped up by allotting coal blocks to central and state public sector units and for captive mines to notified end users. "Coal blocks held by CIL, which CIL cannot bring into production by 2016-17, should be made available to other eligible candidates for development and bringing into production by 2011-12," it said.

Control AT&C losses

On the power sector, the report said that the process of reforms should focus on control over Aggregate Technical and Commercial (AT&C) losses of State power utilities. "Only financially healthy State power utilities can sustain the growing public sector units and provide the needed comfort on payment security to attract private investment in the power sector at internationally competitive tariffs," it said.

To control AT&C losses, it has recommended restructuring of the existing Accelerated Power Development and Reforms Programme and implementation of the liberal captive and group captive regime foreseen under the Electricity Act, 2003.

The report said that even if a 20-fold increase takes place in India's nuclear power capacity by 2031-32, the contribution of nuclear energy to the country's energy mix would be 5-6 per cent. "Nuclear energy, theoretically offers India the most potent means to long term energy security... Developing the thorium cycle for nuclear power and exploiting non-conventional energy, especially solar, offer possibilities for India's energy independence beyond 2050," the draft said.

The committee has suggested that the Petroleum Conservation Research Institute and Bureau of Energy Efficiency be merged and made an autonomous body to achieve financial independence through energy savings. It suggested more exploration for coal, oil and gas to augment energy resources till 2010-31.