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The recent clamour by Tamil Nadu and Karnataka to access the Union government’s “unallocated" quota in power plants promoted by its companies such as NTPC Ltd is not a new story. Nor is the rejection on grounds that transmission networks are not in place. But the events are a reminder of its laziness in pushing the power reform agenda in states.

The unallocated quota of power is a minuscule 5,500 megawatts (MW) compared with the country’s installed capacity of over 200,000 MW. However, it has significant swing ability. The capacity can be used as a reform instrument, as an incentive for states to hasten power reforms—reduce supply losses, undertake regular tariff hikes. However, it is used more as a political instrument—states ruled by friendly regimes are the main beneficiaries—though the official stand is that of using this power to meet exigencies such as droughts. Moreover, the recent grid failure has provided a flimsy reason—to sell this power to states that are drawing more than their allocation from the grid and causing instability that leads to blackouts across states.

It is not enough for the government to herald big-ticket reform measures in the power sector of the kind recently seen—it has hammered a settlement package between utilities and banks for the former to escape a 3 trillion debt trap that engulfs it. Such efforts must go hand in hand with measures to catalyze the commercial viability of the distribution utilities in states.

The recently submitted Deepak Parekh committee report on infrastructure has gone a step further to tackle another aspect of power reforms. It has suggested that the government should use the unallocated power to feed consumers interested in stepping out of their existing arrangement with the state distribution utilities in search of cheaper alternatives. This option must be explored.

It is not as if the unallocated power has not been used as a strategic tool.

To kick start solar power capacity addition in the country, the government has, under the first phase of the National Solar Mission, pooled expensive solar power with unallocated power to make it affordable for utilities.

The power ministry must now commit the unallocated power to states based on their reform performance.

Can states be spurred into taking the rights steps in the power sector? Tell us at views@livemint.com

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