There has been considerable improvements in the structure of power tariff in the country, since the launch of EA 2003 followed by NTP 2006. Despite these improvements the legacy issues of the discoms do come back to haunt their account books and even multiple bail out packages, dedicated scheme of UDAY and other incentives majority of the discoms continue to get over the legacy issues and do not have a seamless revenue flow. Taking cognizance of the situation and suggestions up-hand by various stakeholders Government was keen on revisions of the tariff policy coupled with changes of which many are a “first” in the upcoming CERC Tariff norms for 2019-24 as control period. The chief focus is to sway away from the legacy issues and turn the discoms more profitable apart from keeping the interests of both the power developers and end consumers intact.
India has continuously shown an increasing trend for average cost of supply and average revenue for the discoms yet the collection of past arrears and undue burden of cross-subsidies have jeopardized the sustenance call and have put across pressures on their financials. However, despite best efforts from subsequent Government it was difficult for the discoms to turn the tide and become profitable leading to expedition of ways and means which can prune up their losses. Therefore, following the quest of discoms coupled with market sentiments certain decisive moves are being adopted by the central commission and have laid down in the draft referendum for tariff norms 2019-24. It is anticipated that introduction of steps like measurement of quarterly availability factor for the power generation companies shall be better for the discoms as it shall aid larger quantum of availability for discoms, affecting the short term procurements to get onto lower side. Further, this clearly would signify the average tariff for the particular discom across the designate sets of consumer i.e. Industrial, Commercial and Domestic will most likely decrease as compared to the previous regulation. Although, the computation of availability on a quarterly basis shall be challenging for the quarterly period but shall definitely bring in the reduction in the quantum of short-term procurements meaning greater savings for the distribution utilities. However, the enhanced availability of power for discoms might not lead to lowering of tariffs by the tune it should purely for the demand being on the higher side.
BUSINESS CASE FOR CHANGE IN POWER DISTRIBUTION TARIFFS IN INDIA
- New CERC draft tariff regulations for control period 2019-2024
- Thrust given to add power generation capacity (Renewable and Thermal): A move to create “one market in power”
- Long overdue reforms of Discoms in terms of adequate and rational tariff structure may get addressed by these norms
- Energizing the development of Renewable Sector
- The new paradigm of surplus power sets the stage for new reforms
- Move to rationalise power tariff structure
- Push to “Make in India” initiative
- Increased quantum for Open Access in India
- Reduction in the short-term power procurement