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Discoms go slow on tariff hikes

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Published: April 13, 2015 1:26:13 AM

After showing some discipline to avail of the benefit of the 2012 financial restructuring plan (FRP), state-run power distribution companies...

Discoms, Delhi power companies, Delhi power tarrif, AAP, Arvind KejriwalIn fact, the discoms, which sought and implemented double-digit tariff increases in FY13 (thanks to the lure of FRP), started degenerating into their old practices in FY14 itself. (Reuters)

After showing some discipline to avail of the benefit of the 2012 financial restructuring plan (FRP), state-run power distribution companies have again relapsed into their old, financially unsustainable ways, reports Sumit Jha in New Delhi. Half a dozen discoms have failed to file the mandatory tariff review petition with the respective state electricity regulatory commissions (SERCs) for FY16.

In fact, the discoms, which sought and implemented double-digit tariff  increases in FY13 (thanks to the lure of FRP), started degenerating into their old practices in FY14 itself. While most discoms got tariffs hiked in FY14, the increases were marginal in case of many of them, despite their huge accumulated losses.

The situation worsened further in the last fiscal as only six states hiked their power tariffs and many even failed to file pleas for the revisions by the stipulated deadline.

As per government estimates, cumulative losses for the electricity distribution sector in the country amounts to more than Rs 2 lakh crore. All the discoms taken together lose an estimated Rs 60,000 crore every year even as average transmission and distribution losses continue to remain high at above 24%.

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Political executive often prevents the SERCs from setting tariffs at the levels required to bridge the gap between cost and revenue.

This undermines the Electricity Act, 2003, provision which mandates that distribution companies must file tariff petitions before November 30 every year to enable the SERCs to pass new tariff orders within 120 days or before end of the subsequent March. There is an Appellate Tribunal for Electricity (APTEL) order, asking SERCs to file suo motu petitions in case tariff petitions are not filed by electricity companies by the stipulated date, but in practice, this is also given the go-by.

The Centre is proposing some changes to the Electricity Act to check political interference in the working of discoms and SERCs. The relevant Bill before parliament seeks to stipulate that if a discom fails to file the annual revenue requirement (ARR) 30 days after the deadline set by the regulator, the latter will have a legal obligation to initiate a tariff revision, using the data at its disposal and issue a new tariff order within the next 90 days.

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