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Centre pulls up SERCs for failure to issue tariff orders for FY22

The Ministry of Power has pulled up the SERCs that have not issued any tariff order for FY22 and has directed them to do so at the earliest

Centre pulls up SERCs for failure to issue tariff orders for FY22
Centre pulls up SERCs for failure to issue tariff orders for FY22
  • According to the list shared by the Ministry of Power, Maharashtra, Himachal Pradesh and Kerala are yet to issue tariff orders for FY2021-22

  • In a letter, the Joint Secretary for the Ministry of Power said that it is crucial for states to ensure the financial health of DISCOMs

New Delhi: The Ministry of Power has pulled up the State Electricity Regulatory Commissions (SERCs) that have not issued any tariff order for FY22 a month into the new financial year and has directed them to do so at the earliest to maintain the health of power distribution companies (DISCOMs) in their states. In a letter addressed to state government Secretaries and SERCs, dated May 3, the Ministry of Power said, “As per information available with Ministry of Power some of the SERCs have not yet issued the tariff orders for FY2021-22, thereby not adhering to the provisions of the Electricity Act, 2003 and directions of the Hon’ble APTEL.”

“In order to comply with the APTEL directions and considering the importance of timely issuing of tariff orders under the provisions of Electricity Act, 2003, I have been directed to request that tariff orders for the FY2021-22 are issued at the earliest in order to ensure the financial health of DISCOMs in your State,” said Joint Secretary Ghanshyam Prasad.

Maharashtra, Himachal, Kerala yet to issue tariff orders: Centre

According to the list shared by the Ministry of Power, Maharashtra, Himachal Pradesh and Kerala are yet to issue tariff orders for FY2021-22. While the last order issued by Maharashtra dates back to March 30, 2020, Himachal Pradesh issued its last order on June 29, 2019 and Kerala on July 8, 2019.

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In the letter, the Joint Secretary said that it is crucial for states to ensure the financial health of DISCOMs since they form a vital element of the electricity value chain. “Distribution sector is a crucial element of the entire electricity value-chain. Sustainability of the entire Power Sector is critically dependent on the sustainability and growth of the Distribution Sector.”

The backdrop

The issue of tariff revision has been a sticking point between the Central and the state governments for a long time. The issue is critical especially because most DISCOMs across the country have accumulated huge dues payable to power generating companies over the years, which has impacted the cash flow in the entire power sector. One of the major reasons behind DISCOMs’ inability to pay gencos for the electricity they procure is that they have been running in losses for years. DISCOMs face a number of management issues and other issues pertaining to theft of electricity and non-realisation of dues from state governments. In additions, since the issue of power tariff is a politically sensitive subject, state governments have been reluctant to increase tariffs, fearing backlash from voters. For instance, in FY2020-21, the Delhi Electricity Regulatory Commission (DERC) refused to change the tariff despite requests from DISCOMs. Since DISCOMs have been supplying electricity to consumers at a cost less than the average cost of supply, they have not been able to turn around their losses.

In order to address the issue of DISCOM dues, the Central government has come up with a Rs 3.05-lakh-crore liquidity infusion scheme, which can be availed by discoms only if they improve their performance metrics, which includes revising tariffs to lessen the ACS-ARR gap. 

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