Business Today

Limiting the losses

A new bill seeks to hold states accountable for the mounting losses of their power distribution companies.
Anilesh S. Mahajan | Print Edition: Oct 13, 2013

Encouraged by the manner in which the government managed to pass three controversial bills in the monsoon session of Parliament, the power ministry has drafted an electricity distribution bill aimed at curbing the mounting losses of state distribution companies. The ministry hopes to table the State Electricity Distribution Management Responsibility Bill, 2013, in the winter session.

The Bill aims to make state governments responsible for the financial health of their distribution companies. Will Power Minister Jyotiraditya Scindia succeed in building a consensus on it? Power ministry officials are optimistic after the controversial Food Security Bill, Companies Bill and Land Acquisition Bill finally get passed.

If the power Bill is passed, state governments will have to ensure adequate electricity supply to consumers by improving their distribution companies through financial restructuring and adoption of reforms. They will have to look for ways to finance the accumulating losses caused by their reluctance to revise tariffs due to political considerations. It will force state electricity distribution companies to revise tariffs more frequently and make 100 per cent metering of electricity consumption mandatory within three years of implementation. Currently, a 2010 Central Electricity Regulatory Commission order empowers state electricity regulators to revise tariffs even if distribution companies oppose it.  

The bill is politically sensitive because tariffs are a state subject, while power is on the concurrent list

The Bill is politically sensitive because tariffs are a state subject, while power is on the concurrent list. Aashish Mehra, Partner & Managing Director, Strategic Decisions Group, Asia Pacific, fears it may not be accepted at a time when states are giving free power to farmers. But power ministry officials are hopeful. "This will be a model Bill and states will be allowed to make their own changes," says one power ministry official, who does not want to be identified.

A former power secretary familiar with the developments says the Bill has clauses requiring state governments to submit electricity distribution management statements to the legislature during the budget session. He says state governments will have to make financial restructuring plans or other such schemes a part of state budget statements.

But with polls around the corner, is the timing right? In all likelihood, the power ministry may miss the bus this time and it may fall upon the next government to push the Bill through.

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