India’s Cabinet has approved the long-awaited National Electricity Policy designed to accelerate efficient development of the sector. The policy aims to enhance competition, to ensure open access and promises commercial viability of the sector, as well as attracting private investment. Hinting at developing a market with commercial returns on investment, tariff reform to see a commercial basis to pricing is on the agenda and the policy reiterates the regulator’s responsibility in framing guidelines to ensure open access to the distribution system. The policy also encourages captive power plants to supply to the grid with appropriate commercial arrangements that are also proposed.

The policy, under the Electricity Act, 2003, will serve as a guideline for power regulators and has been evolved in consultation with state governments, the Central Electricity Authority, Central Electricity Regulatory Commission and others. It also reiterates a pledge to increase the scope of rural electrification and provide 100% coverage for households by 2010 and to meet power demand by 2012.

In order to create a reliable rural electrification system the government will provide capital subsidies and long-term debt finance for rural electrification. The system will comprise a Rural Electrification Distribution Backbone with supply feeders and one distribution transformer for every village settlement. The policy also highlights the role of the state as pre-eminent for additional capacity and also aims to increase the annual per capita consumption of electricity to more than 1000 kWh by 2012 with a minimum consumption of 1 kWh per household per day.