Some experts in the sector say the reforms process may by dented by the general elections due next year, but distribution utilities in many states, including Haryana, Punjab and Delhi, have already filed their tariff revision pleas for 2013-14 with regulators while others are in the process of doing so. Utilities were earlier not so prompt in filing tariff petitions.
Raising tariffs will be a shot in the arm for the sector as it will help distribution companies come out of the red and be in a position to make timely payments to generation companies. This will also boost Power supply as state utilities often resort to power cuts because of their poor financial health even if generating companies are able to supply more electricity.
Delhi power discoms expect a 5% rise in electricity prices and about 15-20% surcharge to make up for past losses.
Pricewaterhouse Coopers Executive Director Sambitosh Mohapatra said most states would see annual tariff revisions to the tune of 18-20% due to commitments made under the state debt restructuring plan, efforts to cover past revenue gaps, and increase in operating and power procurement costs because of costlier fuel.
Shankar said power distribution companies have no option but to revise tariffs every year, which is the basic condition to be eligible for any programme of the ministry. The debt restructuring package launched to wipe out the Rs 1.9-lakh-crore accumulated losses of power distribution companies mandates utilities to commit yearly tariff revisions. Under the scheme, distribution utilities will be eligible for a grant if they reduce the gap between the average cost of supply and average revenue realisation by 25% annually.
As per industry estimates, the average gap between cost and revenue in 2012-13 was likely to be 58 paise per unit, down from 75 paise estimated in 2011-12.
Shankar said about 6-7 'focus states', including Jharkhand, Haryana and Tamil Nadu, have conveyed their willingness to participate in the bailout package.
Power Finance Corp Chairman and Managing Director Satnam Singh said tariffs were bound to rise since banks and financial institutions have imposed strict conditions for lending to state distribution companies.
Source- Economic Times