Lower realisation of tariffs compared to higher power generation costs and huge Aggregate Technical & Commercial (AT&C) losses are major factors contributing to the dire financial health of State-owned power distribution companies.
However, the Power Ministry is of the opinion that hikes in power tariffs could be "moderated" if the efficiency of distribution companies -- many of which are loss-making -- are improved.
"If efficiency (of discoms) is increased, then hikes in electricity tariffs can be moderated," Shankar2 said.
The Government is working on an ambitious financial restructuring package for discoms whose losses were estimated to be worth '2.46 lakh crore at end of March 2012.
Faced with the acute crisis, at least about 20 State discoms in recent times have announced power tariff hikes of up to 37 per cent.
"When discoms file for revisions, it may come to hike in electricity tariffs or it may not result in increases," Shankar said.
According to him, discoms have to submit petitions for annual revenue requirements and tariff rationalisation to meet the targeted revenue to State electricity regulatory commissions. The petitions have to be filed every year before the start of the new year.
After getting the green signal from the chief minister, states send the annual petitions to their respective State Electricity Regulatory Commissions (SERCs). These petitions contain details of procurement and supply of power and the related costs along with tariff proposals.
Last year, several states hiked power tariffs including Tamil Nadu, which raised the electricity tariffs by 37 per cent after nine years, Maharashtra by 10 per cent, Rajasthan 18 per cent and Delhi 26 per cent.
The accumulated losses of the state discoms are estimated to be about '1.9 lakh crore as on March 31, 2011 and '2.46 lakh crore as on March 31, 2012.
Pitching for periodic tariff revisions, the Reserve Bank of India (RBI) has said rising losses of discoms have raised "serious concerns" for banks and financial institutions.