Column : Been there, done what?

State governments’ failure to disburse subsidies on time further worsens discom finances. Planning Commission estimates suggest that uncovered subsidies account for around 34% of accumulated liabilities. The revenue loss is further exacerbated by a lack of timely and adequate tariff revisions. States like Tamil Nadu, Uttar Pradesh and Rajasthan had not increased tariffs for several years, leading to the crisis. In the absence of an increase in revenue from tariff, discoms borrowed heavily from commercial banks to finance their high-cost power purchases as well as daily operations. The banks did not exercise restraint in lending to discoms, even in the face of an inevitable default. The Ahluwalia Committee report presciently identified the risk of moral hazard on part of discoms and banks not exercising financial prudence in anticipation of another bailout. A decade later, this risk has not only become real and apparent but worse is that it may

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