The Union Power Ministry, in a bid to provide some relief to cash-strapped distribution utilities, is firming up the strategy of statutory intervention to make power regulators perform better.
This is aimed at holding regulators accountable so that distribution utilities should not face troubles for lack of adequate revenue streams. The ministry proposes to put in place a mechanism whereby the appointments of regulators and their performance would be reviewed. "The ministry is seriously concerned over the present state of deteriorating finances of distribution utilities,” a power ministry official told Business Standard on condition of anonymity.
“Non-viability of tariff has been a matter of concern due to a balooning gap between expenditure and revenue of distribution utilities. The gap is currently filled up by short-term borrowings. This has led to stress on distribution utilities and also on banks' lending capacity to them," the official added.
The official said there are three categories of distribution utilities. "One set of distribution utilities have not prepared their latest accounts nor filed tariff revision proposals with state electricity regulatory commissions (SERC). There are some utilities whose accounts were ready, but have not approached SERC for a long time for tariff revision. Some others are not only regularly filing tariff revision proposals, but have also increased collection efficiency and brought down aggregate transmission and commercial losses.”
However, regulators have not given timely approvals for tariff revision, allowing these utilities to recover increased cost from consumers, the official added.
About MERC
The Maharashtra Electricity Regulatory Commission (Merc) has convened a special hearing on July 9 on a petition filed by Maharashtra State Electricity Distribution Co Ltd (MahaVitaran) for approval to recover Rs 7,623 crore from consumers. As reported by Business Standard, MahaVitaran is on the brink of a financial collapse as banks have stopped providing short term working capital loans to the cash-strapped company.
MahaVitaran has already indicated it wouldn’t be able to meet its capital expenditure targets in the current and next financial years if it is not allowed to recover Rs 7,623 crore from consumers.
MahaVitaran has also pleaded Merc should immediately remove the existing 10 per cent cap on fuel adjustment charge (FAC). This would help it pass on the periodic rise in fuel prices on to consumers. MahaVitaran has proposed an annual revenue requirement of Rs 50,000 crore and an average tariff rise of 17%.
