Pranab asks states to raise power rates

“The operational efficiency of the distribution utilities has to be improved. The states will have to review and revise tariffs regularly to ensure the financial health of these utilities,” Finance Minister Pranab Mukherjee said at the National Development Council meeting here. Planning Commission Deputy Chairman Montek Singh Ahluwalia too has warned that the source of funding to the sector will soon dry up.

The power distribution companies are facing difficulty in raising funds from banks on account of poor balance sheet.  

“Commercial banks have to watch their balance sheets and cannot provide loans indefinitely,”Ahluwalia said, adding, some distribution firms have not raised tariffs for 10 years. Their total loss is estimated at  Rs 70,000 crore.

On the recent problems in power generation, Mukherjee said the sector is facing shortage of coal and natural gas.

“Issues like land acquisition, deteriorating health of the state electricity boards and environmental clearances have also been affecting this sector. The efficiency of distribution companies remain woefully low and the aggregate technical and commercial losses average over 40 per cent,” Mukherjee added.

According to him, a large number of power projects requiring funding of Rs 5,000 crore or more are held up due to delay in clearances, both at Centre and state levels.

“While I am working with my colleagues at the Centre, I urge chief ministers to set up a mechanism for according early clearance to such projects,” he said.

Ahluwalia warned that unless corrective measures are taken, the power sector will experience shrinkage of credit and loss of investor confidence and will not be able to pay money to generators.

“We have to move urgently to implement a package of distribution reforms combined with tariff increases which will make the distribution companies viable for all additional sales,” Ahluwalia said.

Power sector, which is crucial for achieving over 9 per cent economic growth target, is aiming at a capacity addition of nearly 1,00,000 MW in the 12th Plan.