Power utilities’ financial health worries GoM
Inadequate tariff revision rendering operations unviable, say panel
Sanjeev Sharma
Tribune News Service

New Delhi, August 4
Concerns over the financial health of power distribution utilities are mounting as some states have not been raising tariffs for years.

The chief cause for the losses is inadequate and irrational revision of tariffs. Only 16 states have revised tariffs in 2010.

Not only is there is a delay in tariff revision often there is a substantial time lag between successive revisions, according to a note for the Group of Ministers on (GOM) on power headed by the Power Minister, Sushil Kumar Shinde.

In 2008-2009, the financial loss of the utilities on subsidy received basis was Rs 32,678 crore. If the present trend continues, projected losses in the year 2014-15 will be Rs 1.16 lakh crore as per a study conducted for the 13th Finance Commission. Cumulative losses of the distribution utilities in March 2009 are estimated to be Rs 75,000 crore.

Of the 40 utilities of the states that have unbundled their state electricity board (SEB) on subsidy received basis, only 11 utilities are in profit. There is a widening of the gap between average cost of supply (ACS) and average revenue realized (ARR).

The compounded annual growth rate (CAGR) of tariff is less than the CAGR of power cost. The CAGR for tariff estimated by CAG is only 6.95 per cent while the for power purchase cost is estimated at 11.90 per cent.

This implies that the utilities are purchasing costlier power and selling it at cheaper rates every year.

One of the causes of mounting losses is inadequate subsidy being received by discoms in lieu of subsidised power being supplied to consumers though according to section 65 of the Electricity Act, 2003 the subsidy has to be released in advance by the states.

It is also seen that in many states, timely auditing of accounts of distribution utilities is not being carried out. Also, annual accounts are not finalised in time due to old and conventional manual accounting system still in vogue in many states.

NO POWER

For every unit of electricity sold in the country , a loss of 50 paisa is incurred.

The compunded annual growth rate for tariff is only 6.95 per cent, while that for power purchase cost is estimated at 11.90 per cent

If the present trend continues, projected losses in the year 2014-15 will be Rs 1.16 lakh crore