Bid to free power tariff from politics

The Union Power Ministry proposes to am­end the Central Electricity Act to empower state elect­ricity regulatory commissi­ons (SERCs) to revise tariffs.

This decision is expected to enable electric supply companies (escoms) to not only work efficiently in a market-driven economy, but also eliminate political intervention. The amendment will help the SERCs to decide revision suo motu and direct the escoms to revise the tariffs.

The ministry is trying to get the Act amended at the earliest. “We hope that the system will be in place by the end of this year,” a senior official told Deccan Herald. The proposal has been made by the ministry in its 12th Five Year Plan (2012-2017) draft report. “If the cost of power increases every year, the electricity distribution companies (discoms) should have the liberty to revise the tariff to ensure that their financial health is in good shape,” the official said.

By not revising the tariffs every year, most escoms are struggling. As per a report prepared by the ministry, the losses suffered by the escoms were estimated at Rs 1.16 lakh crore in 2010. The financial health of Rajasthan, Uttar Pradesh, Bihar and Punjab discoms, among others, causes concern. However, some discoms in states like Gujarat and Odisha have managed fairly better.

“As the distribution companies are suffering huge losses, they are not in a position to improve the distribution network, leading to more transmission and distribution losses,” said the official.

The Centre has already urged the states to improve the functioning of the escoms.
Now, the Electricity Act empowers distribution companies to approach the SERCs every year for tariff revision. However, many state governments do not allow them to hike tariffs.  “To curb this practice, the Centre wants electricity tariff revision to be out of the clutches of politicians’ whims,” said the official. Besides, the ministry has also suggested that power procurement by distribution companies should be through competitive bidding rather than by direct buying from producers.