Union Minister of Power and New and Renewable Energy R K Singh on Friday termed state-owned power distribution companies, or discoms, as “inefficient structures” and asked them to become wholesalers of power and hire private companies as retail suppliers.
Speaking at the inauguration of the two-day State Power Ministers’ Conference being hosted near the Statue of Unity here in Gujarat, Singh said consumers deserved affordable rates and the option of choosing their power supplier.
“The right to good service and the right of choice are enshrined in the Constitution. You can’t overcharge industrial consumers. How can states get investment when you are charging industry ~8-9 per unit?” he said.
Suggesting a new model of power supply, Singh said states could become the owner and wholesaler of power supply and have private franchisees to sell it to consumers.
“Discoms can run and own the systems, but can have three to four suppliers who will buy in bulk after paying upfront to them,” he said. Similar proposition of ‘content and carriage separation” has been introduced in the amendments to the Electricity Act, 2005, which is yet to be tabled in Parliament.
Asking the states to consider this plan, he said, “We can’t increase jobs in the power industry unless we open up the distribution sector and allow more companies to compete with each other.”
He asked the states to think about the future of the power sector and the nation and not of the "next elections and keep low power rates" for populism.
As part of an annual exercise of rating discoms, the Centre’s State Distribution Utilities Annual Integrated Rating’ for FY18 has ranked Gujarat the highest, based on its financial and operational performance. All discoms of Gujarat topped the list, along with two discoms of Karnataka. Among the laggards were discoms of Uttar Pradesh, Rajasthan, and Telangana.
The Centre’s flagship reform scheme UDAY has been unable to improve the financials and operations of discoms. Rather it has negatively impacted the financials of state governments.
While the minister did not mention UDAY in his speech, he urged states to improve the ease of doing business in the power sector. “Ease of business is necessary to attract investment to cater to the rising demand, and sanctity of contracts is warranted for that,” he said.
Andhra Pradesh and Uttar Pradesh are reviewing power tariffs, especially of renewable projects. The minister warned states that if they didn’t adhere to payment discipline, bankers would stop giving loans to the power sector.
Referring to Andhra, he said, “One state breached the terms of the power purchase agreement and five different ambassadors got in touch with me.”
The two day conference being hosted near Statue of Unity, the tallest statue in the world, would see congregation of energy ministers and department of all states and union territories. As the country achieves electrification of all households, the union ministry of power is prepping for another set of reforms to improve availability and quality of power. The Centre is planning to pursue the states to expedite supply reforms, renewable capacity addition and improving energy efficiency standards.