First, a $35 million wind development fund will be set up via grants or loans from multilateral external agencies, according to the Rajasthan Energy Development Agency. This fund, accessible to investors until March 2004, will be used for soft loans of up to one-third of the capital costs of wind turbines. Observers say many loopholes remain unplugged, however, and the falling Indian rupee is expected to put more financial strain on the hard-pressed Rajasthan government.
Second, given the poor financial situation of the utility, Rajasthan State Electricity Board (RSEB), the state is making critical, major financial restructuring in order to clear the utility's stranded costs. This should enable new independent power companies to start their operations on a financially viable basis. It will include a readjusting of tariffs, settlement of stranded liabilities; and implementation of a mechanism to clear the accumulated debt and overdue commercial liabilities.
To help in this task, the state government has formed an independent body, the Rajasthan Electricity Regulatory Commission (RERC). This will regulate the power sector through reconfiguration of the distribution system into economically viable geographical zones, each served by an independent distributor.
Under the program, the RSEB will buy wind power at INR 3.03/kWh ($0.066/kWh) until the end of this financial year, March 31, 2001, rising 5% per year. The state has also exempted users from electricity duty up to March 2005.