The increasing losses of power distribution companies [discoms] – firms which procure electricity from the generators and distribute to the consumers – have once again started haunting the states and union government alike. In 2015, the union government had orchestrated a financial restructuring package [FRP] under which over 75% of the outstanding debt about Rs 400,000 crore of discoms was taken over by state governments whereas for the balance 25%, they were allowed to issue bonds – backed by sovereign guarantee – to raise funds at concessional interest rate. The FRP was intended to enable discoms start on a clean slate, reduce losses and eventually eliminate them. During 2016-17 and 2017-18, they did show significant reduction but during 2018-19, this...
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Category: Tariff Policies & Subsidies
Powerless, cosmetic moves
Given the extant tariff policy and Power Purchase Agreements, the Centre’s plans to reform PPAs to provide power at competitive prices and make discoms viable fall far short The Union Government has set up a committee to reform Power Purchase Agreements (PPAs) to ensure power availability at competitive prices and make distribution companies (discoms) viable. A PPA is a contract between a generation company (genco) and discom which lays down the terms of electricity purchase by the latter from the former, including the tariff, which is subject to approval by the State Electricity Regulatory Commission (SERC). The Cabinet is also considering a new tariff policy which will inter alia require discoms to pay a surcharge to the genco for delayed payment, which...
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Reform PPAs, stop fleecing consumers
The government has set up a committee to reform power purchase agreements [PPAs] [it is a contract between generators and power distribution companies (PDCs) setting the terms of electricity purchase by the latter from the former even as the tariff is approved by the state electricity regulatory commission (SERC)] in a manner as to make power available at ‘competitive price’ and give relief to consumers. The move looks laughable when seen in juxtaposition with the extant tariff policy environment as also the position on ground zero with regard to the architecture of PPAs already signed. On tariff policy, under directions from the state governments [they own and control PDCs], PDCs sell electricity to certain category of households and farmers at...
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Latest solar scheme is a non-starter
The Government’s launch of the KUSUM programme to promote solar power bodes well for farmers, DISCOMs and the environment. But there are impending challenges, including a huge financial liability on farmers themselves. Moreover, will they really be willing to join the scheme? In a recent interview, Minister of State for Power and Renewable Energy RK Singh informed about a scheme viz the Kisan Urja Suraksha evam Utthaan Mahabhiyan (KUSUM), which the Government proposes to implement over a period of three years. Intended to promote the use of solar energy in rural areas, KUSUM allows a farmer to use his barren land — currently lying fallow — to set up a solar plant on it for 1 MW or so (in...
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Can KUSUM salvage farmers and discoms?
In a freewheeling interview given to a leading national daily, Minister of state for power and renewable energy RK Singh, informed about a scheme for rural areas viz. Kisan Urja Suraksha evam Utthaan Mahabhiyan [KUSUM] already approved by the cabinet and will be launched within a time frame of 2-3 weeks – to be implemented over a period of three years. Intended to promote the use of solar energy in rural areas, the scheme allows a farmer to use his barren land – currently lying fallow – to set up a solar plant on it for 1 MW or so [in case, the land is cultivable then he can set it up on stilts and grow crop below]. Whereas, during...
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Shun populism, salvage discoms
During the financial year 2018-19, 31 State-run electricity distribution companies [discoms] are reported to have incurred financial losses of Rs 21,658 crore. Coming as it does after a declining trend in their losses during the previous two years [from about Rs 52,000 crore during 2015-16 to Rs 32,000 crore during 2016-17 and further down to about Rs 17,000 crore during 2017-18], this raises concerns. To understand the reversal during 2018-19, it is important to analyze as to why their losses declined in the previous two years. In November 2015, Modi – government had launched Ujwal DISCOM Assurance Yojna [UDAY] to revive the ailing discoms. Under it, they were given a financial restructuring package [FRP] that involved takeover of 75% of...
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Power producers at risk, courtesy ailing discoms
As per reports, power plants with investment of over Rs 300,000 crore are in jeopardy as the state electricity boards [SEBs]/power distribution companies [PDCs] have not yet paid dues of about Rs 60,000 crore for the electricity purchase made by them. The concern is understandable as with so much money locked up in receivables, it is nearly impossible for the generators to run their plants. The situation is particularly critical for independent power producers [IPPs] who account for half of the dues and run the risk of turning into non-performing assets [NPAs]. The current scenario is a continuation of a trend seen for decades whereby SEBs/PDCs – faced with substantial shortfall in their revenue from sale of electricity to consumers...
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Ailing discoms render industry uncompetitive
The uninterrupted supply of requisite units of power at competitive rate to industries helps them reduce the cost of production. This along with lower cost of other infrastructure such as transport, storage and handling etc can give them the strength to compete in the domestic and international markets. This will also enable them temper their resistance to multilateral trade agreements such as the Regional Comprehensive Economic Partnership [RCEP] – between the 10 members of ASEAN plus 6 countries outside the group viz. Australia, New Zealand, Japan, South Korea, China and India – which promise manifold increase in access to markets but are stymied by fear of low cost import consequent to elimination of customs duty mooted under these agreements. Yet,...
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More than meets the eye
In a power battle between the providers and consumers of electricity, the latter lose, yet again During the first decade of the 2000s, in a bid to boost power generation and to make it available at ‘affordable’ and ‘stable’ price to consumers, the then Government had mooted the idea of ultra mega power projects. Two such plants were bagged by Tata Power Ltd (TPL) and Adani Power Ltd (APL) under tariff-based competitive bidding (TBCB), each with an installed capacity of 4,000 MW and 4,620 MW, respectively. While the TPL is based entirely on imported coal, APL uses 70 per cent domestic and 30 per cent imported coal. Under long-term power purchase agreements (PPAs), they committed to sell to power distribution companies at...
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Power battles – the consumer loses, yet again
In a bid to give a boost to power generation in India and make it available at ‘affordable’ and ‘stable’ rate to the consumers, in the first decade of 2000s, the then government had mooted the idea of ultra mega power projects [UMPP]. Two such plants were bagged by Tata Power Ltd [TPL] and Adani Power Ltd [APL] under tariff-based competitive bidding [TBCB] each with installed capacity of 4000 MW and 4620 MW respectively. While, TPL is based entirely on imported coal, APL uses 70% domestic and 30% imported coal. The projects were committed to supply power to state electricity boards [SEBs]/power distribution companies [PDCs] at fixed tariff all through project’s operational life. The tariff in case of TPL was...
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