Revision of tariffs must to address debt burden facing power sector: Anil Razdan

• The former Power Secretary said that the policy announcements need to be accompanied with subsequent correction in tariffs

• Razdan said that it is important to ensure that both the industry and household consumers should be able to avail it at cheaper rates

New Delhi: While noting that the Rs 90,000 crore relief package announced by the government will serve its purpose of easing the debt burden on discoms (power distribution companies), former Power Secretary Anil Razdan has said that revision of tariff is necessary for addressing the debt burden facing the power sector. While speaking to PSU Watch on Tuesday, Razdan said, "The Rs 90,000-crore package will obviously help in keeping generation going because it will allow distribution companies to make payments to the generators. But it doesn't remove the underlying financial problems of the power sector. Because tariffs are fixed by regulatory commissions. Revision of tariffs is necessary for addressing the debt burden facing the power sector."

The statement comes in the backdrop of the government announcing a package of Rs 90,000 crore for the ailing power sector in order to revive cash flow by enabling discoms to clear their dues. 

New tariff policy is must and should become the law of the land: Razdan

The former Power Secretary said that the policy announcements need to be accompanied by subsequent correction in tariffs. "Certainly two things can be done to reduce the cost of power. The first is to deal with the distortion in the tariff setting. I do not think that the industry is sustainable at the present methodology of tariff fixation, which basically puts the weight of household consumers on the industry. In order to be globally competitive, the industry needs to be able to avail electricity at a reasonable tariff." 

"A new tariff policy is a must and should become the law of the land," he added.

How can power be cheaper?

Razdan said that if one wants power to be the driver of the economy, it is important to ensure that both the industry and household consumers should be able to avail it at cheaper rates. "Particularly for thermal power generation, there are two issues. The Return on Equity (RoE) needs to be revised downwards. In the present situation of surplus power, it is very much possible to revise it. The second thing is that the cost of coal needs to be reduced drastically. The duty on coal in India comprises of a number of charges and is among the highest in the world. If this is reduced, the burden of the tariff will come down substantially and power would be affordable," he said.

"The AT&C losses need to come down drastically. And if we are going to treat the distribution sector as something that must be run by state agencies and not opened up to the private sector, then we are not catching the bull by its horns," the former bureaucrat added.

The backdrop

Power Minister RK Singh recently said that the new National Tariff Policy has been cleared by a GoM (Group of Ministers) headed by Union Home Minister Amit Shah. The tariff policy has been pending for over two years now and is expected to bring in reforms like consumer rights, promotion of industries and improve the sustainability of the power sector. It is expected to make provisions for penalising discoms for load-shedding. The policy is likely to reduce cross-subsidy provided to industries in a phased manner. The government has also pitched for privatisation of discoms, saying that it will ensure better services to consumers.

(PSU Watch– India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Telegram. Join PSU Watch Channel in your Telegram and stay updated)