Rise in power purchase cost hampering state utilities' revenues

Even after proposed 15-26% tariff hike, there would be an unrecovered revenue gap of Rs 25,300 cr

To cope with the increase in the cost of power purchase, major states have proposed a rise of 15-26 per cent in rates. Even if this is done, state power distribution utilities would still face  a aggregate unrecovered revenue gap of Rs 25,300 crore, said a report by ICRA.

The report has been compiled on the basis of rate petitions filed by only 15 states. The remaining ones have delayed filing these.

This is a violation of the terms of regulations, according to which filing should have been done before November 30, 2014.

While the power distribution companies (discoms) of Bihar, Haryana, Madhya Pradesh and Uttarakhand have proposed a revision between 15 per cent and 26 per cent, those of Andhra Pradesh, Gujarat, Maharashtra and Telangana have asked for a modest revision of three to eight per cent.

Chhattisgarh, Punjab and Odisha have not proposed revision and have left the treatment of the revenue gap to the discretion of the respective State Electricity Regulatory Commissions (SERCs).

ICRA attributes 86 per cent of the Rs 25,300 crore unrecovered revenue gap to the utilities in Andhra Pradesh, Bihar, Haryana, Punjab, Odisha and Telangana.

“Overall, the cost-reflective nature of rate determination as well as time-bound recovery of the regulatory assets by SERCs would be critically important, especially for the utilities,” the report noted.

ICRA added that rate determination for FY15 by SERCs for distribution utilities, especially of Tamil Nadu and Rajasthan, was delayed by 9-11 months, a major deviation in compliance of the terms in the financial restructuring scheme implemented by these utilities.