The health report of the discoms shows a bad physiology. And the propensity for politicizing power sector reforms can derail the much needed technology overhaul of smart grid & smart meters. The odds are even greater when it comes to administrative-financial discipline. Federalism means State Rights but it also means responsibility on part of States for a particular set of functions and the maintenance of institutions for the discharge of those functions.
And in the domain of financial relations between Centre & States, if the Centre’s commitment to federal polity is to be judged by fairness in distribution of tax resources, the federated states are to be judged by their performance in the power sector.
Idle capacities are sitting in power plants even as many states are reeling under power cuts. The discoms are not able to buy power because they have no money. There is huge theft & unbilled electricity being supplied. State governments are not supporting discoms with adequate additional equity, etc. As a result, the discoms are borrowing, mostly from the state owned banks. They are unable to repay and are even defaulting on interest payments.
Discoms in Rajasthan, Uttar Pradesh, Tamil Nadu and Jharkhand are seen to be under maximum stress with high amount of debt as well as accumulated losses. Interest payments alone account for 50 pc of the operational loss, according to UP discoms. State governments provide subsidy for supply to rural areas at reduced rates but because of insufficient data on consumption, the subsidy is inadequate and does not cover the costs of the discoms.
And then there are scary instances resulting from cancellation of Power Purchase Agreements as with Rajasthan government which retained just two out of nine committed PPAs. Seven PPAs were thrown out with much costs inflicted on the gencos. Developments such as these are harmful for the sector.
The power minister has promised turnaround of stressed utilities in three years’ time. He says government is in active dialogue with discoms and there will be noticeable changes. But the method for that change will not be the central government’s bailout role. And that is a welcome statement.
The combined debt of discoms is over Rs 3 lakh crore. Reform, affordable tariff & financial discipline is no specialist jargon, or a fancy phrase, it is the need of the hour & the states have to assume responsibility. Read our cover story for details.
