Mounting losses of power distribution companies (discoms) have forced the Centre to press the panic button. Concerned that a part of the burden would finally fall on the Centre, the Planning Commission has sounded out state governments that are unwilling to allow discoms to raise consumer tariffs about the time bomb they are sitting on.
As per the Commission?s estimate, the discoms? losses in the financial year 2009-10 must have exceeded Rs 40,000 crore and could further go up to Rs 68,000 crore by the end of the current fiscal, unless tariffs are revised. If corrective steps are not taken, the discoms could go bankrupt and seek a bailout by the Centre, which is already under severe fiscal strain.
Discoms? average commercial losses are in the range of 32%. This is despite pouring in huge amounts of money by the central government under schemes like Accelerated Power Development and Reform Programme (APDRP) to help them cut losses. With most states disinclined to even allow private players through the franchisee route? let alone privatising the distribution sector?the Centre is left with no option but to bank on the public sector to turn around the distribution sector.
?The Centre is resorting to capital expenditure-driven schemes like APDRP to reform the distribution sector. However, the public sector in its present form is not geared up to turn around the distribution sector,? says Kuljit Singh, an energy expert with global consultancy firm Ernst & Young (E&Y).
Meanwhile, the cost of electricity is going up, which means a commensurate increase in discoms? losses. ?The cost of electricity has already touched Rs 3 per unit, putting a strain on the finances of discoms,? Singh said.
