Emphasising on the criticality of avoiding future electricity tariff shocks, the Group of Ministers (GoM) on addressing issues related to discom viability has suggested linking tariffs to annual inflation.
The GoM, chaired by Minister of State for Power Shripad Yesso Naik, during their third meeting on Friday also stressed reviewing regulators’ performance in determining tariffs.
“The support from Government of India for privatisation initiatives by states was suggested. The need for regulators to adapt to latest developments in the sector including the current levels of RE integration, requirements of capacity building and O&M costs, while finalising tariffs, was also discussed,” Power Ministry said.
It was discussed that delays in payment of government department dues and subsidies are forcing discoms to resort to working capital loans, which are not being passed on in tariff, it added.
There are also delays in passing on of fuel and power purchase cost adjustments in tariffs thus creating need for working capital which are not considered in annual revenue requirements of the utilities.
“To avoid future tariff shocks, it was suggested to link tariffs to annual inflation-linked tariff hike(s). The GoM reiterated its commitment and expressed resolve to take necessary measures for improving the financial viability of discoms,” the Ministry said.
Naik emphasised on the need for states to demonstrate greater political will and determination to make the power sector viable and urged the member states to work upon the ideas that have emerged during the meeting.
He also highlighted the need for designing a mechanism for financial restructuring of discom liabilities, lowering interest burden on utilities, development of storage solutions, facilitating daytime power supply for agriculture to lower the overall power purchase costs and reduce subsidy burdens.
Besides, the GoM also discussed in detail the contours of the action plan for identifying the ways to reduce the outstanding debts and losses of discoms and the means to bring them into profits.
TATA power distribution, Odisha, as a special invitee, shared the best practices adopted and their journey toward making their discom profitable.
The member states actively participated in the meeting and presented the overview of state discoms. They gave valuable suggestions for improving the financial condition of discoms.
States of Uttar Pradesh, Madhya Pradesh, Andhra Pradesh, Maharashtra and Tamil Nadu made presentations on the subject.
It was recommended to invite All India Discom Association (AIDA) to the next GoM meeting for their suggestions. AIDA is led by former Power Secretary Alok Kumar as its Director General.
The fourth meeting of the GoM will be held in Andhra Pradesh in April 2025.