Industry experts said consumers in states with high losses, like Uttar Pradesh, Rajasthan and Tamil Nadu, will face high tariff hikes, but the move was necessary to provide electricity access to the country's 44% deprived population. The committee, headed by former CAG V K Shunglu, has also suggested restructuring distribution companies, imposing penalties on consumers in high theft areas, prepaid metering for non-paying customers and billing agricultural users.
The panel, in its report submitted to Planning Commission, alleged that electricity regulators were working as per wishes of state governments, which for political reasons do not favour tariff hikes.
"Many regulators have left uncovered gaps to avoid tariff shock. It is a regulator's duty that entire validated costs of distribution companies get recovered. Repeated accounting jugglery results in serious liquidity problems for distribution companies. Such practices need to be stopped as tariff shocks are state government's concerns," the report said. The committee's recommendation is in line with a recent order of appellate tribunal for electricity mandating state distribution companies to file tariff revision petitions by April 1 every year.
Accumulated losses of distribution utilities grew to Rs 82,000 crore by 2010 due to a gap of about Rs 0.60 per unit gap between average cost and average revenue. Public sector banks financed over 70% of the losses though there are government collateral securities of 42%.
PricewaterhouseCoopers executive director Kameswara Rao said people with electricity access would have to pay the real cost if remaining part of the country was to be electrified. A multi-pronged strategy including automate fuel pass through and inflation linked index were required to improve financials of distribution companies.
The Shunglu panel has proposed setting up a SPV by the RBI to purchase liabilities of distribution companies. It has also proposed an area-specific surcharge on power to ensure honest consumers do not subsidise power in regions where there is large scale theft.
Source- Economic Times