In order to reduce stress on power assets, electricity tariff should be rationalised similar to the phased increase in diesel prices and railway fares, according to Reserve Bank of India Deputy Governor Urjit Patel.

“Bottlenecks related to fuel linkages and environment need to be resolved to bring assets on stream and reduce stressed assets. Rationalisation of tariffs in energy sector is essential and it is politically possible if the quality of services provided to our people improves,” Patel said.

“We had some tariff increase in railways, and the way we closed the gap on the subsidy to diesel by increasing 50 paise per month, it is a good way to adopt for electricity tariff,” he said at a seminar on ‘Financing for Economic Growth: A policy roadmap’ organised by the Finance Department, Government of Gujarat.

Patel suggested that imposing a sharp 10-12 per cent increase in electricity tariffs at one go could pose a problem, but a phased increase of 2 per cent a quarter or 2.5 per cent every four months can be absorbed by the consumers.

The RBI Deputy Governor’s comment comes at a time when power companies are facing some serious challenges in coal supplies, prices and tariff structure.

Banks need to adopt a smoother and time-bound financial restructuring model that will help de-bottleneck the banking sector in these areas.

“It should not mean that if a project has some difficulty it stands on it. Someone else can take it over, like a consortium of lenders or a new buyer. It should be done before the asset becomes an NPA,” he said.

Cautious approach On the bankers’ cautious approach towards restructuring or refinancing of projects, Patel said banks are justified in being risk averse as the ratio of non-performing assets in infrastructure sector is as high as 30-40 per cent of overall NPAs.

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