DISCOMS
Tamil Nadu Generation and Distribution Corporation (Tangedo) filed a general retail power tariff revision petition with the Tamil Nadu Electricity Regulatory Commission proposing to hike power tariffs by 10% to 35%.
WHY HAS THE TARIFF REVISION PETITION BEEN FILED BY THE POWER UTILITY?
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Factors responsible for this
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- Even after joining the Ujwal DISCOM Assurance Yojana (UDAY) - a scheme meant for improving the health of state-owned electricity distribution companies (DISCOM) in January 2017, Tamil Nadu could not bring down the gap between the Average cost of Supply (ACS) and the Average Revenue Realised (ARR) to nil by 2018-19, as stipulated in the scheme.
- What is more important than all these factors is the commitment provided by the Tamil Nadu government to fully absorb Tangedo’s losses, due to which the state government has allocated rs 13,108 crore this year in the form of budgetary support.
- The Center tightened its focus on the state by having withheld, through the Power Finance Corporation(PFC) and the Rural Electrification Corporation (REC) the release of rs 3,435 crore under the Special Liquidity (Aatmanirbhar Bharat Abhiyan) loan scheme, apart from not releasing the grant of rs 10,793 crore under the Revamped Distribution Sector Scheme(RDSS).
- The Reserve Bank of India( RBI) has issued guidelines to commercial banks that if lending is to be provided to any state-owned power utility including DISCOMs, the entity should have filed a tariff revision petition by November 30 every year.
ABOUT OTHER POWER DISCOMs IN THE COUNTRY
- The Tamil Nadu case is an example of what is happening in the distribution sector in the country.
- According to NITI Aayog’s report of August 2021, most power DISCOMs incur losses every year-the total loss was estimated to be Rs 90,000 crore in the financial year 2021.
- To help these DISCOMs, the centre in May 2020, announced a Liquidity Infusion Scheme (Aatmanirbhar Bharat Abhiyan), under which loans of rs 1, 35,497 crores have been sanctioned.
OTHER STATES POWER TARIFFS?
- Despite the centre’s prescription for annual or periodical revision of retail power tariffs, states have found the exercise painful. As the parties in power in the states link the process to their prospects at the time of Assembly or Lok Sabha elections.
- The general approach of many parties is to use electricity as a tool for their political agenda and make promises to allure people despite knowing that such assurances if implemented, are not sustainable in the long run.
DO STATES PROVIDE SUBSIDIES TO SECTORS LIKE AGRICULTURE
- Yes, a common feature of the power distribution policies of the states is to provide free or heavily subsidized supply to agriculture.
- The connections for the farm sector are unmetered.
- Tamil Nadu, which has been implementing a free power supply for the sector since the mid-1980s, had long resisted the installation of meters even for fresh connections. But it has been allowing the installation of meters for agricultural pump sets.
- A senior official claims that the meters are there only to assess consumption and not for billing.
- Segregation of feeders has been suggested as an option to arrive at the accurate consumption of the farm sector so that the disproportionate quantum of consumption is not attributed to agriculturists in the absence of meters.
- Gujarat is cited as a success story in this regard.
- In Manipur, according to Niti Aayog’s report, prepaid metering was supplemented with improved power supply resulting in improved billing and collection efficiency as well as lower commercial losses.
- The Madhya Pradesh Electricity Regulatory Commission, in its tariff order of March 2022, came out with an incentive package in the area of demand side management.
- It is stipulated that an incentive equal to 5% of energy charges should be given on installation and pushed for the use of energy-saving devices such as ISI energy-efficient motors for pump sets and programmable on-off /dimmer switches with automation for street lights
Government Schemes related to DISCOMS
UDAY YOJANA
The Ujwal DISCOM Assurance Yojana (UDAY) for financial turnaround and revival of power distribution companies (DISCOMs), will ensure accessible, affordable and available power for all. o UDAY Scheme: UDAY provides for the financial turnaround and revival of Power Distribution companies (DISCOMs), and importantly also ensures a sustainable permanent solution to the problem. UDAY will Rs 4.3 lakh crore debt of the utilities besides introducing measures to cut power thefts and align consumer tariffs with the cost of generating electricity.
- It empowers DISCOMs with the opportunity to break even in the next 2-3 years. This is through four initiatives (i) Improving operational efficiencies of DISCOMs; (ii) Reduction of cost of power; (iii) Reduction in interest cost of DISCOMs; (iv) Enforcing financial discipline on DISCOMs through alignment with State finances.
- Under the scheme, state governments, which own the discoms, can take over 75 per cent of their debt as of September 30, 2015, and pay back lenders by selling bonds. For the remaining 25 per cent, discoms will issue bonds.
- UDAY is optional for all States. However, States are encouraged to take the benefit at the earliest as benefits are dependent on performance.
- States accepting UDAY and performing as per operational milestones will be given additional / priority funding through Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), Integrated Power Development Scheme (IPDS), Power Sector Development Fund (PSDF) or other such schemes of Ministry of Power and Ministry of New and Renewable Energy.
- Such States shall also be supported with additional coal at notified prices and, in case of availability through higher capacity utilization, low-cost power from NTPC and other Central Public Sector Undertakings (CPSUs).
REVAMPED DISTRIBUTION SECTOR SCHEME
It aims to improve the operational efficiencies and financial sustainability of discoms (excluding Private Sector DISCOMs).
About:
It will provide conditional financial assistance to strengthen the supply infrastructure of discoms (power distribution companies).
The financial assistance will be based on meeting pre-qualifying criteria and upon achievement of basic minimum benchmarks.
All the existing power sector reforms schemes such as Integrated Power Development Scheme, Deen Dayal Upadhyaya Gram Jyoti Yojana, and Pradhan Mantri Sahaj Bijli Har Ghar Yojana will be merged into this umbrella program.
The scheme will be available till 2025-26.
Implementation:
It would be based on the action plan worked out for each state rather than a ‘one-size-fits-all’ approach.
Nodal Agencies:
Rural Electrification Corporation and Power Finance Corporation.
Components:
Consumer Meters and System Meters:
The scheme involves a compulsory smart metering ecosystem across the distribution sector—starting from electricity feeders to the consumer level, including in about 250 million households.
It is proposed to install approximately 10 crore prepaid Smart Meters by December 2023 in the first phase.
Feeder Segregation:
The scheme also focuses on funding for feeder segregation for unsegregated feeders, which would enable solarization under the PM KUSUM scheme
Solarization of feeders will lead to cheap/free daytime power for irrigation and additional income for the farmers.
Modernization of Distribution system in Urban Areas:
Supervisory Control and Data Acquisition (SCADA) in all urban areas.
Rural and urban area System strengthening.
Objectives:
Reduction of AT&C losses (operational losses due to inefficient power system) to pan-India levels of 12-15% by 2024-25.
Reduction of the cost-revenue gap to zero by 2024-25.
Developing Institutional Capabilities for Modern DISCOMs.
IMPORTANT ORGANISATIONS
RURAL ELECTRIFICATION CORPORATION
Rural Electrification Corporation is a Navratna Company functioning under the purview of the Ministry of Power.
It takes the role of a public Infrastructure Finance Company in India’s power sector and promotes rural electrification projects across India.
The company provides loans to Central/ State Sector Power Utilities, State Electricity Boards, Rural Electric Cooperatives, NGOs and Private Power Developers.
Developers.
POWER FINANCE CORPORATION
Power Finance Corporation is an Indian financial institution. Incorporated in 1986, PFC is the largest infrastructure finance company dedicated to the power sector under the administrative control of the Ministry of Power
PFC is essentially a state-run non-banking financial company that focuses on power infrastructure, while REC is an implementation and finance company with a focus on generation.
PFC has become the 11th public sector enterprise to get the ‘Maharatna’ status in the country
The Maharatna dispensation was ushered in by the Union government for mega Central Public Sector Enterprises (CPSEs) to become global giants (introduced in 2010).
CPSEs are those companies in which the direct holding of the Central Government or other CPSEs is 51% or more.
“Maharatna” status is granted to a company which has recorded more than Rs. 5,000 crores of net profit for three consecutive years, an average annual turnover of Rs. 25,000 crorese for three years or should have an average annual net worth of Rs. 15,000crorese for three years. It should also have global operations or footprints.
A CPSE should also have a Navratna status, and be listed on an Indian stock exchange.
The Government has laid down criteria for grant of Maharatna, Navratna and Miniratna status to CPSEs.
