Power reforms trip: Tariffs still a sore point with states

Bihar, Maharashtra, MP, Jharkhand are among states that announced higher tariffs for 2017-18

Many states have rationalised power tariffs, setting in motion reforms in electricity pricing. Bihar, Maharashtra, Madhya Pradesh and Jharkhand are among the states that announced higher tariffs for 2017-18.  There are, however, notable exceptions like Uttar Pradesh, Rajasthan and Delhi.

Bihar led with a 20 per cent rise, across brackets. It, however, also introduced direct subsidy transfer for some sections of consumers, thereby reducing the impact on the revenue of power distribution companies (discoms). Jharkhand’s raise was 12 per cent, Madhya Pradesh’s 9.5 per cent and Karnataka raised by 8.1 per cent. 

The central government’s programme for debt restructuring of state discoms underlines the need for regular rate revision. Ratings agency Icra says the overall subsidy dependence of discoms for 2017-18 would be Rs 81,000 crore, an increase of around 8 per cent over the previous year. 

“The increase in the subsidy requirement is predominantly driven by first, the subsidy, and concessional tariff (rate) announcements in states and/or continuation of the subsidised nature of tariffs by state governments for certain consumer categories,” says Sabyasachi Majumdar, senior vice-president at Icra.

Privately owned discoms also continue to be under financial stress, said an official. Power distribution in Delhi is run by private entities and it’s been more than two years that any tariff increase was approved by the Delhi Electricity Regulatory Commission (DERC). 
 

The three discoms here — Tata Power Delhi Distribution, BSES Rajdhani Power and BSES Yamuna Power — had requested a hike of 

7.42 per cent, 7.26 per cent and 17.01 per cent, respectively, in November 2014. DERC, in its notification of November 13, 2014, approved a tariff hike on the total monthly bill in the range of 4.5-7 per cent. This was also rolled back and for the past two years, no hike was done.

The total revenue gap (regulatory assets) owed to the three discoms was Rs 34,000 crore till fiscal year 2015-2016, being the shortfall that had built due to a non-cost reflective set of rates over the years, said executives.