These states continue cheap electricity tariffs despite failing to meet UDAY targets

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power sector, power industry, power tariff


The regulators’ failure to enforce adequate tariff increases is despite the fact that discoms in the country have reported an aggregate financial losses of over Rs 15,000 crore in the first half of this fiscal, as much as the losses incurred by them during the whole of last year.
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Despite a big slippage on meeting the operational goals set under the UDAY scheme in FY19 and the Union power ministry repeatedly flagging inadequate tariff hikes as one of the reasons behind state electricity boards’ (SEBs) weak financial health, electricity regulators of Bihar, Jharkhand and Chhattisgarh have apparently buckled under pre-election political pressure and announced tariff plans that would leave big revenue deficits for FY20. These three states have been reporting the highest revenue losses from pilferage and tariff collection inefficiency in the country.

Under the tariff plan approved by the state’s regulator, Bihar SEB will raise Rs 1,401 crore less than demanded by it. The boards of Jharkhand and Chhattisgarh will mobilise Rs 1,211 crore and Rs 1,460 crore, respectively, less via tariffs than what they suggested in the petitions filed with the respective regulators.

So far, only six state regulators have approved the tariff plans for the next financial year, the ones in Andhra Pradesh, Assam and Uttarakhand being the other three.

The regulators’ failure to enforce adequate tariff increases is despite the fact that discoms in the country have reported an aggregate financial losses of over Rs 15,000 crore in the first half of this fiscal, as much as the losses incurred by them during the whole of last year.

This signalled a reversal of a declining trend in the losses since the UDAY scheme for these entities’ revival was launched in November 2015. Inadequate tariff hikes lead to piling up of “regulatory assets” for the discoms, the recovery of which often takes time.

According to government estimate, discoms lose Rs 22,000 crore revenue annually due to the creation of new regulatory assets. Such unrealised assets at a pan-India level stood at a whopping `1.4 lakh crore at the end of FY18 .

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“The median tariff hike for the discoms at all India level has reduced from 8% for FY15 to 4% for FY16 and FY17 and further to 3% and 1% for FY18 and FY19 respectively,” Sabyasachi Majumdar, senior vice-president, Icra, recently said. “We expect the tariff hike to remain subdued for FY20 as well, given the limited or no tariffs hikes proposed by most of the discoms and in view of the upcoming Lok Sabha elections,” Majumdar added. Only 17 states had increased their tariffs for FY19 compared to 22 for FY18.

 

The development comes at a time when the tariff collection efficiency of the discoms, by their own admission, is deteriorating in the wake of new consumer additions through rural electrification. While Bihar and Jharkhand have cut down budgetary allocations to their respective energy departments in their annual budgets before the general elections, Chhattisgarh has announced a flat 50% discount on power bills to consumers who use below 400 units of electricity in a month. The Chhattisgarh discom had accumulated regulatory assets worth Rs 761 crore at FY18-end.

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