Discoms’ power purchase costs soften in first quarter

State-run power producer NTPC has cut its power tariff to distribution companies by up to 50 paise per kilo watt hour across regions


A reduction in power purchase cost is likely to help in boosting power demand from state-owned distribution companies. Photo: Bloomberg
A reduction in power purchase cost is likely to help in boosting power demand from state-owned distribution companies. Photo: Bloomberg

New Delhi: The government’s idea of cutting down power cost through efficiency improvement measures in the electricity value chain seems to be making an impact. State-run power producer NTPC Ltd. has cut its power tariff to distribution companies by up to 50 paise per kilo watt hour across regions.

As per data from the power ministry, the biggest beneficiaries of NTPC’s tariff reduction are distribution companies in the states of Delhi, Chandigarh, Himachal Pradesh, Telangana and Jharkhand, where tariffs came down by between 33 paise and 50 paise in the April-June period of 2016 from a year ago. An executive with the state-run utility, who asked not to be named, said the reduction was possible because of efficiency improvement measures such as changes in coal logistics. NTPC’s average tariff came down by 15 paise to Rs.3.04 a kilowatt/hour in the April-June quarter from a year ago and is set to further come down in the current quarter, said another official, who also asked not to be identified.

The union cabinet had on 4 May liberalised the way coal is supplied to central, state and independent power producers so that power companies have the liberty to use the fuel at their most efficient plants and generate electricity at the lowest cost possible. That is a departure from the earlier practice of government allocating coal to specific power plants.

A reduction in power purchase cost is likely to help in boosting power demand from state-owned distribution companies that are struggling to meet the full energy demand of customers due to their financial difficulties. Debt-ridden state power distribution firms are now making an effort to turn around under the Ujjwal Discom Assurance Yojana (UDAY) approved by the union cabinet last November, under which state governments concerned take over three-fourths of the utility debt and will oversee their performance improvement goals. Participating utilities are expected to bring down their revenue losses from power theft and inefficient bill collection.

According to the second official quoted above, states like Uttar Pradesh, Rajasthan and Haryana have taken strong measures to improve performance of their utilities. Media reports last week suggested that Uttar Haryana Bijli Vitran Nigam Ltd. (UHBVNL) has reported a sharp improvement in operational performance under a state initiative which required replacing meters and paying consumers’ dues in instalments for ensuring 24 hour uninterrupted power supply. Calls made to UHBVNL officials on Monday morning were not answered at the time of publishing this report. Haryana, which signed the UDAY deal on 11 March, has identified the feeders in rural areas where distribution losses are high and is urging consumers to take these steps voluntarily. States which fail to turn around their power utilities despite the debt restructuring under UDAY will have to show the firms’ losses as state debt in their budgets from 2018-19.

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