Power ministry asks regulators to revise power tariffs by Apr 1 every year


The Central government has asked regulatory commissions to issue tariff orders of all distribution licensees before April 1 of the tariff year and report compliance to the Union power ministry by May 31 every year. In a communication to chairpersons of central and all state power regulatory bodies, the power ministry has sought compliance of legal provisions in the Electricity Act 2003 and the Tariff Policy 2016, which mandate timely determination of the adequate power tariffs by the electricity commissions.

“It has been brought to the notice of the government that despite above explicit legal provisions, there are significant delays in issuance of tariff orders by some of the state commissions. Regulatory assets are being created by some of the state electricity regulatory commissions as a matter of routine. This is against the letter and spirit of the law and not only negatively impacts financials of the distribution licensees and their business sustainability but is also prejudicial to the public interest as the discoms do not have enough money to buy power or maintain the distribution system,” the letter said.

Discom overdue outstanding to generation companies are at Rs 1,24,437 crore, despite the Centre’s liquidity infusion scheme under which Rs 75,000 crore have been disbursed to states. Discom outstanding loans are nearly Rs 6,00,000 crore. The average revenue gap of distribution utilities is in the range of 72 paise per unit and the regulatory assets are at Rs 78,000 crore.

Section 64 of the Electricity Act 2003 provides for determination of cost reflective tariff by appropriate commission within 120 days from receipt of tariff petition. Similarly, Tariff Policy 2016 states that the commissions should initiate tariff determination on a suo-moto basis in case the tariff petitions are not filed in time. It mandates commissions to ensure the tariff changes are brought into effect from the beginning of each financial year and under business as usual no regulatory assets — deferred tariff hikes — are created. The same has also been provided in an order of the Appellate Tribunal for Electricity passed in November 2011.

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Besides, the liquidity infusion scheme of total Rs 1,30,000 crore special loans to distribution companies, the centre is soon likely to bring out a Rs 3 lakh crore reforms-linked distribution reforms scheme which will disburse amount only when the discoms achieve set milestones. The government is also working on amendments in the Electricity Act, 2003 for delicencing power distribution segment to introduce competition.



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