Centre urges states to take steps to boost financial health of power utilities
Union Minister of State for Power Yesso Naik on Sunday highlighted the need for measures to help power utilities of states to improve their financial viability.
Addressing the states’ group of ministers meeting here, Minister Naik highlighted the need for designing a mechanism for financial restructuring of liabilities of distribution utilities, lowering the interest burden, development of storage solutions, facilitating daytime power supply for agriculture to lower the overall power purchase costs and reducing subsidy burdens, according to a statement issued after the meeting.
The Minister also emphasised the need for implementing AI and digital innovations and the need for ensuring cost-reflective tariffs for the financial viability of the power sector. He added that implementing these measures would help utilities improve their financial sustainability. He also underscored the need for a scheme similar to the Ujwal DISCOM Assurance Yojana (UDAY), a financial turnaround and revival package for electricity distribution companies (DISCOMS) in India.
The Energy Ministers of Uttar Pradesh, Andhra Pradesh, Madhya Pradesh and Maharashtra and senior officials from the Central and State governments, State Power Utilities of Member States, Power Finance Corporation (PFC) Ltd and REC Ltd attended the meeting. TATA Power Distribution, Odisha, as a special invitee, shared the best practices adopted and their journey toward making their DISCOMs 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. The states of Uttar Pradesh, Madhya Pradesh, Andhra Pradesh, Maharashtra and Tamil Nadu made presentations on the subject.
The contours of the Action plan identifying the ways to reduce the outstanding debts and losses of the distribution utilities and the means to bring them into profits, were discussed in detail.
Emphasis was placed on the need for a review of regulators' performance for determining tariffs. The support from the Government of India for Privatisation initiatives by the state was suggested. The need for regulators to adapt to the latest developments in the sector, including the current levels of RE integration, the requirements of capacity building and operation and maintenance (O&M) costs while finalising the tariff, was also discussed.
The issue of delays in payment of government department dues and subsidies is forcing DISCOMs to resort to working capital loans, which are not being passed on in tariffs. There are also delays in passing on of Fuel and Power Purchase Cost Adjustments in tariffs, thus creating the need for working capital, which is not considered in the Annual Revenue Requirements of the Utilities. To avoid future tariff shocks, it was suggested to link tariffs to annual inflation-linked tariff hikes.
The Group of Ministers reiterated its commitment and expressed resolve to take necessary measures for improving the financial viability of DISCOMs.
Minister Naik also emphasized the need for states to demonstrate greater political will and determination to make the power sector viable and urged the member states to work on the ideas that have emerged during the meeting.
It was also unanimously decided to hold the next meeting of the Group of Ministers in Andhra Pradesh in April.
