State governments were to have raised tariffs by now as part of the bailout package—most haven’t
Last year, as part of a mammoth Financial Restructuring Package (FRP), a host of bankrupt state electricity boards (SEBs) promised to raise tariffs regularly—on April 1 each year—among a host of other measures. Though not a runaway success, the FRP saw some of the more financially-weak SEBs from Tamil Nadu, Uttar Pradesh, Rajasthan and Haryana come on board. And with banks rescheduling their short-term loans, the large overdues of the sector have started getting settled. Though the elections are being blamed for this, few SEBs have gone ahead and filed for revising tariffs, an essential pre-requisite of the FRP—given the time taken for the tariff-hike process, states should have filed their petitions by November.
The gap between the cost of the power and the sale price, at an all-India level, remains above R1 per unit, and all power utilities between them have already wiped out their net worth—by FY12, this was minus R32,000 crore—making the sector completely non-financeable. And thanks to the AAP’s power subsidies in Delhi, other states like Haryana and Maharashtra have gone and upped this already. It remains to be seen whether, now that states have gone and breached their promises in just the first year of the FRP, if banks will take any action. Otherwise, like various bailouts in the past, the FRP will also end up throwing good money after bad.