Centre to privatise power discoms in UTs

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Published: May 17, 2020 8:23 AM

Currently, roughly 35% of the power being consumed in the country are paid for by the consumers as government subsidies galore, while the release of these get delayed.

power sector india, privatisation of power departments india, finance minister Nirmala sitharaman, coronavirus stimulus package indiaThe Finance Minister said the government will soon release the new tariff policy.

Sending a message to states that stick to policies that cripple the power sector, the Centre on Saturday said power departments and distribution utilities in Union Territories (UTs) will be privatised, with the facility of open access for industrial consumers. The moves comes at a time the overdues of state-run discoms to generators have crossed Rs 80,000 crore and the Centre had to pitch in, with another Rs 90,000 financing facility under state guarantee to keep their operations unaffected.

Finance minister Nirmala Sitharaman said the Centre hopes the privatisation of UT discoms will “provide a model for emulation by other utilities across the country”. Also, the minister said the government will soon release the new tariff policy, which was being worked on since May 2018. Currently, roughly 35% of the power being consumed in the country are paid for by the consumers as government subsidies galore, while the release of these get delayed.

“Privatisation of distribution sector in UTs would bring in significant efficiency gains, the state govts too must take a cue and extend this to all key metros so that the quality of power supply goes up significantly,” Rajesh Ivaturi, partner, power and utilities, EY India, said. Among all the discoms which supply power in the UTs, the largest is located in Jammu and Kashmir, which owe Rs 5,443 crore to power generators as on March-end.

Sitharaman also said a new tariff policy will be rolled out soon where the focus would be on consumer rights and ensuring power supply to the industry at competitive rates. The provision of creating “regulatory assets” — recoverable discom expenses which regulators acknowledge as pass-through costs, but are not immediately built into tariffs — will be removed from the tariff policy, the government said. Given that inadequate and slipshod metering coupled with inefficient collection system continues to lead to costly delays in disconnecting supplies to defaulters, the new tariff policy will also advocate the use of smart meters to bring sustainability in the discom business.

To salvage state-run discoms, the government has recently announced a fresh loan of Rs 90,000 crore through PFC-REC, and these loans will be linked to discoms implementing reforms such as digital payments for consumers, liquidation of outstanding dues of the state governments and formulating a plan to reduce financial and operational losses. With the aim of increasing competition in the electricity distribution segment all over the country, the government has already drawn up plans to allow multiple private franchisees in each area, while state-run utilities will continue to own the network. However, the model falls short of outright privatisation.

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