The Planning Commission does not seem to be happy with the rising wave in favour of power tariff reductions nationally triggered by Delhi Chief Minister Arvind Kejriwal's 50% tariff relief for domestic consumers.
"The policy of free power is a very bad idea and against the spirit of reforms. Unless we improve the financial health of utilities and stop the policy of freebies, it will be difficult to look after the ongoing reform process," B K Chaturvedi, Member-Energy and Infrastructure, said in an interview.
The former cabinet secretary was responding to a question on the dampening impact of the calls for tariff reduction being made by multiple states encouraged by the Delhi government's latest populist move months before general elections. "The power sector is not in a position to bear the burden nationally. The consumers should pay what they can afford," Chaturvedi said.
Encouraged by Delhi's move, the Maharashtra government has also announced a 20% tariff cut for consumers. Besides, Haryana too announced cut in power tariffs earlier this month. Similar calls for tariff cuts are being made in Punjab, Chhattisgarh and Bihar. Chaturvedi said power utilities providing support to the poorest sections is a good idea provided they can afford it.
That, however, is not the case. Power distribution companies had accumulated losses of Rs 2.4 lakh crore as on March 2012. Non-reflective tariffs as political freebies coupled with rising cost of power purchase has led to combined short-term debt of Rs 1.9 lakh crore. The centre had in September 2012 announced a Financial Restructuring Package (FRP) to bail-out discoms that had timely tariff revisions as a precondition.
Eight major defaulting states have started restructuring the liabilities and tariffs were being corrected. However, Kejriwal's announcement of subsidizing half of the power cost has dampened the enthusiasm for reforms, experts say.
The Delhi government has also ordered a Comptroller and Auditor General of India (CAG) audit of discoms' accounts. The three city discoms, owned by Reliance Infrastructure and Tata Power, have challenged the government's decision in the Delhi High Court.
Chaturvedi also said the government should allow rebidding of those infrastructure projects where work is yet to commence and the developers are facing difficulties in commissioning. He, however, cautioned against rebidding of projects in the power sector which are at advanced stages of commissioning.
The Central Electricity Regulatory Commission (CERC) is currently hearing disputes between consumers and private companies -- Tata power and Adani Power – over viability of tariffs from their two 4,000 Megawatt projects.
Source- Business Standard