Power minister cracks down, for a new UDAY PDF Print E-mail
Tuesday, 12 December 2017 04:16
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Shobhana edit

Not allowing discoms to pass on more than 15% ATC loss and capping cross subsidy surcharge a great idea


While the power ministry has, over the years, come up with several measures to try and make discoms more efficient and profitable, many of these have not been implemented. The UDAY scheme launched in late 2015, for instance, had targeted efficiencies through lower AT&C losses at 15% over the next 3-4 years. Power minister RK Singh, however, says losses have actually gone up in some states. In a fresh attempt to try and ensure discoms shape up, Singh intends to usher in a few big changes in the rules through amendments to the tariff policy and the Electricity Act. The first big measure that the power ministry has outlined is to disallow AT&C losses of beyond 15% from being recouped via higher tariffs. This is a good move because it will force the discoms and state governments—who have not done as much as they should have to lower AT&C losses since these were perennially funded by banks—to get serious. Once the new law is in place, state governments cannot pass on their inefficiencies to consumers and, hopefully, this will push them to put in place systems to reduce pilferage and theft of electricity. Although such a measure has been considered in the past, it has never really worked because it was not part of the law.

The other reform being planned by the power ministry is to cap cross-subsidy charges at 20%, again by an amendment of the law. In other words, if the average cost of providing electricity is Rs 3 per unit, the tariff for cross-subsidised categories of consumers cannot be less than Rs 2.40 per unit. This is an excellent move because, for too long, industrial units have paid the price for the inefficiencies of the discoms; in almost every state, industrial consumers pay the highest tariff, anywhere between

Rs 7-8 per unit. As the minister has pointed out, currently, the element of cross-subsidy is a high 200-300%, but once the tariffs are rationalised, open access will become redundant. If state governments still want to subsidise other categories of consumers—farmers who pay nothing or very little and individuals—they must pick up the tab and must disburse these subsidies directly to consumers. Given the precarious finances of most state governments, most are unlikely to be able find the money for large subsidies. In the past, the way out of the financial discipline that schemes such as UDAY imposed on them, SEBs resorted to load shedding and backing down of power purchases—with Singh looking at capping even this, hopefully the new laws will push them to work harder to bring down AT&C losses. It is a shame if, as Singh has said, as many as 16 states have seen AT&C losses rising from 20% to 56% two years after UDAY.


State governments must shape up, and the power ministry’s decision to make the RPO (renewable power purchase obligation) mandatory and to impose penalties is a very good one. In fact, what is important is that the regulator too has to honour the tariff, and more so if it has been arrived at through an open bid. Also, it is a good move to have the penalties imposed by a central regulator rather than leaving this to the state regulators. Too many PPAs have been reneged on in the hope of new deals at lower tariffs, and state governments must now become more responsible financially and otherwise.



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