Political consensus needed to save bleeding discoms, says ASSOCHAM

ASSOCHAM suggested the Prime Minister for taking initiative to create an all party consensus on enabling state owned discoms to adjust power tariff to recover rising costs of power generation, transmission and distribution and thereby save the power distribution sector from imminent collapse due to its precarious financial condition.

In an analysis of the current power situation, the Associated Chamber of Commerce and industry (ASSOCHAM) pointed out that the entire power generation capacity of the country was currently functioning at 65 per cent of its rated level. This was because the discoms have no money to pay for the power they have to buy from power generators. The power generating companies, therefore, have reduced their generation to cope up with the situation where they have an excess power with no buyer around.

Referring to the financial condition of the discoms, ASSOCHAM said that together the discoms carry a huge burden of debts and financial losses The debt burden was Rs 3.04 lakh crores and accumulated losses Rs 2.52 lakh crores adding upto a total of Rs 5.56 lakh crores . If there is no basic change in the situation and they continue to bleed like this, the Chamber spokesman said, not only will the distribution system face financial collapse but new investments in the power sector would be discouraged.

The discoms, mostly state owned were in such a state of financial collapse because the states concerned were unwilling to raise power tariffs to the consumers for different reasons. Unable to buy the entire power they need, the discoms were restricting themselves to only a portion of the power and are practicing long hours of power cuts as a short term answer to their predicament.

Referring to the malaise in distribution, the chamber quoted from UP electricity regulator to point out that out of 3.54 crores of households, registered electricity connections were only 1.14 crores. Even out of them metered connections were only 70.67 lakhs. Out of every 100 users only 35 were paying, thus the cost of power of every 100 was being borne by 35 raising their burden. If all 100 paid, the burden of cost to each one would be much less automatically. The non-payers were often privileged or powerful and not necessarily poor.

The chamber also said that what was meant for farmers and free was also facing diversion to others thereby increasing the losses to the discoms. The chamber also quoted the enormous increase in the debt and losses of discoms in Haryana, Maharashtra and other states. However, where the discoms were privately owned they insisted on metering of all consumers and collecting the dues.

The chamber says there is a need to impress upon the states and all political parties the imperative of adjusting power tariffs to the reality of rising costs with a specific plan to economise on generation costs. It commended the Centre's plan for a separate grid supply to agriculture to prevent diversion of the supply to other users. It said in the context of competitive electoral promises to reduce tariffs to consumers and free power supplies to the poor, the states were reluctant to do what is economically sound.

Therefore, the Government should take the initiative to build a political consensus on the imperative of recovering power costs from consumers otherwise the whole system was in danger of collapse, adds the ASSOCHAM.

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