April 18, 2013

Electricity price revisions expected in 19 states in FY13-14 , and 9 have already increased tariffs


State-owned power distribution companies (discoms) have become more punctual in the filing of annual tariff revision petitions before regulators, with the Centre putting pressure on states to undertake power reforms amid concerns about declining creditworthiness of the sector.

As many as 19 states have filed tariff petitions for 2013-14 with regulators and, of these, nine have already issued revised tariff orders. Last year, too, discoms in all states and union territories except Assam moved regulators for tariff revision.

Tariff hike by states this year ranges from 22% to 25% for Andhra Pradesh to 0.78% for Madhya Pradesh. Haryana has increased electricity tariff by 13%, Punjab 9% and Bihar, Meghalaya, Nagaland by 7% each. Goa's discom had also sought tariff hike but its proposal was rejected by the regulator.

 "On electricity tariff, things are moving in the right direction," said Shubhranshu Patnaik, director, Deloitte India. Sambitosh Mohapatra, an energy expert from PwC, too sounded bullish on the prospects of electricity tariff revision. "The increase in electricity tariffs in the region of 10-12% annually is going to be the recurring theme over the next three years given the current level of cost recovery," Mohapatra said.

 Discoms in another 10 states, including debt-ridden Karnataka, Rajasthan and Tamil Nadu, filed annual revenue requirement (ARR) petitions with regulators and are expected to revise tariff soon.

Regulatory activism on tariff revision in states like Tamil Nadu has raised new expectations about power sector reforms. Perhaps for the first time, the Tamil Nadu Electricity Regulator Commission initiated suo motu proceedings for revision of tariff this year due to delay in filing of ARR petition by the state discom.

Significantly, the apex electricity regulator, the Appellate Authority for Electricity (Aptel), ruled in November 2011 that the state electricity regulatory commissions (SERCs) must initiate suo motu tariff revision in case discoms fail to approach them on time. Aptel delivered its ruling while disposing of a petition filed by the Union power ministry.

Significantly, discoms were earlier using bank loans to finance their cash losses arising from non-revision of tariff. But following the Reserve Bank of India's directive in September 2011, banks and financial institutions stopped lending to discoms.

The Centre-approved R1.9 lakh crore debt recast package for discoms also has the condition that discoms availing the facility cannot take short-term loans to meet their operational losses during repayment of loans. 

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