Government plans to turn around discoms in 7 states, sets up panel

The government will devise by next March a plan to turn around ailing companies that distribute power to seven states which account for roughly three-fourth of the country’s total energy consumption.

For this, a committee has been set up under the chairmanship of Planning Commission Member B K Chaturvedi. It will also comprise an RBI deputy governor and secretaries of the (leading electricity-consuming) states of Tamil Nadu, Rajasthan and Uttar Pradesh, besides officials from the ministry of power.

The panel would, in the first phase, look into the financial health of discoms in seven states — Madhya Pradesh, Punjab, Haryana and Andhra Pradesh, besides Uttar Pradesh, Rajasthan, Tamil Nadu — and suggest a turnaround plan, according to officials.

The discoms in other states will be looked at in the second phase. “The committee will give suggestions in the next six months for revival of discoms,” said a member of the committee.

The situation of the country’s discoms is discouraging as their cumulative losses stood at over Rs 1 lakh crore last year, besides outstanding loans — including short-term and long-term — at Rs 177,602 crore as on March 31, 2010.

The state governments were earlier advised to clean the balance-sheets of utilities by writing off the cumulative loss and ensuring that the utilities do not incur a loss after this, a senior power ministry official said.

The distribution companies are unable to recover their cost of operation because of a mismatch in the cost and the tariff. There has been no substantial increase in power tariffs for the past six years.