Centre to states: Tariff rise no substitute for improved efficiency

The Centre has conveyed to states that Ujwal Discom Assurance Yojana (UDAY) will be a game-changer but clarified that tariff increase will not be a substitute for efficiency improvement. States have been told that those with 30 to 40 per cent losses cannot expect consumers to pay for their inefficiency and regulators cannot pass on inefficiency of discoms to consumers.

Most states have maintained tariff increase trajectory, and the average annual increase in last five years has been eight per cent. Tariff revision carried out by some states during 2011-12 and 2015-16 include Kerala (16 per cent), Delhi (14 per cent), Andhra Pradesh (13 per cent), Tamil Nadu (12 per cent), Chhattisgarh (11 per cent), Harayana (10 per cent), Rajasthan (10 per cent) and Uttar Pradesh (nine per cent).

However, the Centre has reiterated that tariff increase will not be the only solution to discom distress but has insisted that they will have to simultaneously curb aggregate technical and commercial losses (AT&C), concentrate on demand side management, improve efficiency, especially in the wake of improved coal availability and coal swapping.

Union minister of power Piyush Goyal told Business Standard, “Periodic tariff revision will be easier to implement and absorb by consumers. Quarterly revision of tariffs will be passed on legitimate costs to consumers. Necessary changes in tariff policy will be put in place in a month.” He said efficiency improvement measures by discoms will avoid unreasonable tariff hike.

The minister said all states are on board, adding that UDAY will lead to a situation wherein honest consumers do not pay for dishonest ones.

Meanwhile, Goyal said the Centre has already proposed amendments to the National Tariff Policy. Some of the amendments include expansion of existing power plants owned by states permitted for optimum utilisation of existing infrastructure, expansion of private developers up to 100 per cent from existing capacity.

Besides, coal washery rejects based projects will be encouraged to develop on cost plus basis by the public sector units and the Renewable Energy Generation Obligation (RGO) will be mandatory on all upcoming coal and lignite-based thermal stations.