and have to contend with a restructured loan. Discoms cannot borrow from banks to finance present short-term losses and an alternate arrangement is proposed where three-year support on a diminishing scale will be given on a case-by-case basis. This alternate arrangement is, in fact, a bailout within a bailout. The scheme is subject to certain mandatory conditions such as upfront subsidy payment using feeder level data, streamlining metering and billing processes, annual revision of tariff to reduce cost-revenue gap. It seeks a commitment to reduce short-term power purchase and liquidate regulatory assets. Recommendatory conditions include a time-bound plan for power procurement, cross-subsidy reduction, operationalising open access and cleaning up accounts. However, most of the proposed conditions are mandatory legal provisions and the reason that we ended up in a crisis was that these were not implemented as envisaged under the Act. The scheme, however, does not analyse this aspect at all, nor does it provide any solution that will lead to better compliance.
Treat symptoms, not disease
Focusing merely on regular tariff increases without addressing fundamental institutional issues, coupled with the risk of moral hazard, may lead us to yet another bigger bailout in future. The Centre is not taking any steps to ensure that SERCs who are responsible for ensuring accountability of discoms and state governments function in an autonomous and effective manner. As the table shows, even the basic requirement of appointing members for SERCs is not being fulfilled in most states and the Centre has seldom raised this issue. There has been hardly any thought or investment in improving the capacity of civil society to participate in regulatory processes, which can act as an effective means of ensuring accountability. While the current crisis is bad enough, it is worse to not use it as an opportunity to avert future ones. It is very unfortunate that we may have to wait for yet another crisis to ensure the proper functioning of the very institutions that govern the sector.
The authors are with Prayas Energy Group, Pune