Power tariff woes, debt rising despite UDAY: It's not just regulatory fault

The power ministry recently said discoms cannot be blamed for their rising debt and dues

Timely revision in power tariffs did not happen even after the launch of UDAY, the debt restructuring programme of the NDA government, in November 2015. In most cases, discoms have not even submitted the mandatory tariff petitions to state electricity regulators (SERCs). Some states have asked for a reduction in tariff in their submissions for the current fiscal year.

The Ministry of Power recently blamed SERCs for not ordering regular tariff revision and stated that discoms cannot be blamed for their rising debt and dues.

In their submissions for tariff approval for 2019-20, Andhra Pradesh, Gujarat and Karnataka have sought no increase in tariff. Jharkhand has received approval from the regulator to keep tariff the same as last year when it increased by 98 per cent for domestic consumers and reduced by 11.7 per cent for industry. Bihar, which had increased power tariff by 55 per cent in 2017-18, sought an increase in the current fiscal year as well, but the SERC denied it.

The Ministry of Power did not respond to a detailed questionnaire sent over an e-mail.

Most discoms have not submitted their tariff revision applications for the current fiscal year. Under the Electricity Act, 2003, discoms have to file their annual revenue returns before the closing of the fiscal year, but most states delayed it citing the Lok Sabha election.

The comment by the power ministry comes at a time when UDAY is weaning away. "Aggregate external debt of discoms is set to increase to pre-UDAY levels of Rs 2.6 trillion by the end of this fiscal year (March 2020). With most states having limited fiscal headroom, continuous financial support to their discoms may be difficult," said a recent Crisil report.

Launched in 2015, the programme was aimed at turning around state-owned discoms financially and operationally. While the financial part was concluded with states taking over the losses of discoms and issuing bonds, operational changes have not taken place.

Tariff revision was one of the odd-50 reform steps that discoms committed doing under UDAY. Feeder metering, rural feeder segregation and smart meters had the target year of 2016-2018, which could have helped discoms to become efficient.

UDAY’s portal on Tuesday showed while 60 per cent of the DT metering (rural) target was achieved, mere 4 per cent of the smart metering target was met; 72 per cent of the feeder segregation target was reached. Targets have been achieved in LED bulb disbursal, feeder metering in urban and rural areas and rural feeder audit and electrification of rural households.

The Ministry of Power said tariff hikes by discoms were not in tandem with the rise in input cost, especially cost of coal and freight. Freight rates for coal increased by over 10 per cent in the last two years.

“Earlier, a busy season surcharge was charged to consumers for nine months. This was subsumed into freight rates, adding the burden on consumers for the entire year. Similarly, coal terminal surcharge also got subsumed into freight rates," said a government official.

The Centre's commitment under UDAY was, however, to facilitate low-cost coal for states to help reduce their power cost. For most states, the power ministry committed to rationalising coal prices, facilitate domestic coal supply and ensure supply of 100 per cent crushed coal from Coal India, among others.