Delay in tariff order can unplug Discoms’ finances

The slow progress in issuing electricity tariff orders for 2016-17 is becoming a major concern for power generators, worried about the load on the financial health of the State distribution companies (Discoms).

“Inadequate tariff increase and delay in tariff revision will render bootless the Centre’s attempts to turnaround Discoms through the Ujwal Discom Assurance Yojana,” said a senior official of a private power generator.

While 11 States are yet to issue tariff orders for 2016-17, 16 have but with most effecting only a modest increase.

“Due to delayed tariff orders, the financial health of the Discoms has further deteriorated. Discoms cannot procure power, resulting into non-availability of supply to consumers and poor service,” he said.

So far, States including Tamil Nadu, West Bengal, Assam and Tripura have not filed a tariff petition for 2016-17.

In Delhi, the three private sector Discoms — Tata Power Delhi Distribution Ltd, BSES Rajdhani and BSES Yamuna — have filed the tariff petition but the Delhi Electricity Regulatory Commission is yet to.

Similarly, in Maharashtra, Haryana, Rajasthan, Kerala and Jammu & Kashmir, tariff orders are yet to be issued despite completion of the public hearing process.

Even the increase in tariffs has been small in most of the 16 States that have revised electricity rates for 2016-17. While in Bihar and Odisha there was no increase, Punjab and Gujarat reduced tariffs by 4 and 10 paise a unit, respectively.

Uttar Pradesh, Telangana and Karnataka have increased rates by 4-9 per cent. The exception has been Chhattisgarh, which has raised electricity tariffs by 16 per cent for 2016-17.

Credit rating agencies have expressed concern over the delay/non-filing of tariff petitions. In a recent report, Fitch said: “For the majority of States, tariff increases are required to reach breakeven status even after the other savings to which they are committed are considered.

“A meaningful improvement in Discoms’ economics will especially benefit power generation companies via higher utilisation and timely clearance of dues.”

ICRA’s Sabyasachi Majumdar said in a recent report that the delay in issuance of tariff filings and tariff orders may be attributed to the UDAY scheme “which resulted in some uncertainty about quantifying the impact of the scheme on the cost structures of Discoms.”