Davos: Terming rise in tariffs as ‘bitter pill’, power minister Jyotiraditya Scindia has said Indian power distribution companies need to reduce technical and commercial losses as well to improve financial health.
Amid rising concerns about the precarious financial position of discoms, Scindia said that there were two ways to make their health better.
“One is to take the bitter pill of raising the power tariffs, which is not in the hands of central government alone as it is a state government initiative and responsibility in our federal setup. The other way is to reduce the AT&C (Aggregate Technical & Commercial) losses and to make those discoms much more financially healthy and if you are able to do that then it does not necessarily result in raising power tariffs,” Scindia said in an interview at the World Economic Forum in Davos.
“I think a balance of both needs to be done and my impetus is not only on the issue of tariffs. Rather my impetus is more on the issue of reducing the AT&C losses and making the discoms much more viable,” he said.
AT&C is a true indicator of total losses in the system.
High technical losses in the system are primarily due to inadequate investments over the years for system improvement works while commercial losses are mainly on account of low metering efficiency, theft and pilferages.
Besides high AT&C losses, lower tariffs are among the other factors blamed for the poor financial health of discoms.
The ministry is already working on a Rs.1.90 trillion Financial Restructuring Package (FRP) for state-owned discoms.
Scindia said the power ministry is expected to proceed further with the plan in a month’s time.
On demands for hike in power tariffs, the minister said nearly all states have revised them already.
“All these states have done that and there are three or four states left that are still working on it. I think that is now going to be a process, which is an ongoing process,” he noted.
“Having said that, I firmly believe that the key issue is not the rise in power tariffs. The key issue is financial health of discoms, because if you want the power sector to grow, it can not grow in isolation. It has to grow across the value chain, so it has to grow in transmission and in distribution and key to this lies in the financial health of the discoms,” the minister emphasized. When asked whether he is seeking financial assistance from the finance ministry on discom debt rejig, Scindia said, “I am not”.
As part of FRP, he said, the ministry was “concentrating on seven states that amount to almost Rs.1 trillion, of the Rs.1.9 trillion. Most of them have come on board and in the next one month or so, we should be proceeding on that plan”.
The ministry is also planning to have a rating system for discoms to make them much more transparent in performance.
“I am also thinking of setting up a rating system for discoms across many parameters so that we as a sector, including centre and states, are much more transparent in terms of our performance,” Scindia said.
Regarding long pending issues such as fuel supply agreements (FSAs) between power companies and Coal India Ltd , he said: “I have been in this ministry for past 70 days and in these 70 days we have resolved almost all the issues on FSAs.
“There are 60 gigs (Gigawatts) of generation capacity for which FSAs need to be signed. Out of that, in the last 55 days, we have signed FSAs for 14-15 gigs. NTPC Ltd has just got the board approval and they will be signing another 10-12 gigs. So you will see the process speeding up even further in the coming days.”
One gigawatt (GW) is equal to 1,000 megawatt (MW).
“I have met with the association of the power producers, there is a power ministers conference in February, I will be meeting with the banks which look at financing, so I am looking at every stakeholder and resolving the issues,” the minister said. PTI