Coming down hard on the states doling out free or cheaper electricity at the expense of distribution companies, Power Minister Jyotiraditya Scindia has said that the cost of such subsidies should be borne by the governments themselves.
“I have no problem if a State Government wants to give subsidy, or even free power. But that free power must be given not on the balance sheet of the discom. That free power must be given on the balance sheet of the State Government,” Scindia said.
Advocating that discoms be kept cash-neutral pursuant to any state subsidy, Scindia said, “It (free or cheaper power) should become a subsidy item in the State Government’s balance sheet, and not on the discom’s balance sheet, which today is not the case.
“The states say they will give free power, but the losses suffered by the discoms are not bridged from the State Government’s coffers and in the end it is the discom that suffers. This is the problem.”
While Scindia did not specifically name any state, the Governments have announced plans for or are already providing electricity free of cost or at lower rates to certain sections of the society, such as farmers.
The Minister’s comments come at a time when financial position of most of the discoms is in bad shape and the Centre’s Rs 1.9 lakh crore debt restructuring package for these entities is facing roadblocks due to certain reservations expressed by some states.
Noting that the Central Government also gives a lot of subsidies, Scindia told PTI in an interview that these subsidies are not given on the balance sheet of any ministry but “from its (Central Government’s) own balance sheet“.
“Similarly, the State Governments must give it on their own balance sheets and keep the discoms cash neutral. If you are able to do these two things, your gap between ACS (Average Cost of Supply) and ARR (Average Revenue Realisation) immediately will get narrowed,” he said.
In an apparent reference that states need to do more in the power sector, Scindia said there is also the issue of cross subsidy.
“What is happening is that if state is not able to compensate the discoms for some free power given to one section, they ask the discoms to hike the tariff for another segment to compensate for the subsidy burden.
“So what we need in India is greater transparency and accountability. If you want to give a sop or a subsidy, there is nothing wrong in it, but give it on the strength of your wallet, strength of your budget. Such kind of practices is a problem area today,” he asserted.