Government To Roll Out New Tariff Policy, UDAY 2.0 For Resolving Discoms’ Losses
Utility and power cables hang from a pole in the Khilona Wala Bagh slum cluster in New Delhi. (Photographer: Dheeraj Singh/Bloomberg) 

Government To Roll Out New Tariff Policy, UDAY 2.0 For Resolving Discoms’ Losses

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The government is in the process of rolling out a new tariff policy and UDAY 2.0 to address the issue of losses of discoms, which is the "only difficulty" in ensuring round the clock electricity supply for all, Power Minister R K Singh said.

According to the PRAAPTI portal, the total outstanding of the discoms to gencos as of July this year stood at Rs 73,425 crore, including the overdue amount of Rs 55,276 crore.

The dues to discoms become overdue after 60 days of non-payment of the bill, allowing generation companies to charge penal interest on that.

"There is a capacity to transfer (supply) any quantum (of power). There is no reason why 24X7 power cannot be given. The only difficulty in this (24X7 power for all) is losses to some distribution utilities. They don't have money to pay for power," Singh told PTI.

About the steps being taken by the government, the minister said that the central government has already made it mandatory for discoms to open letters of credit for getting supply from generation companies excluding state government power plants from Aug. 1, 2019.

He was of the view that the mandatory opening of letter of credit, would take some time to reduce stress on power generation companies.

He said that new tariff policy has already gone to the Cabinet for vetting and approval while the power ministry is working on the UDAY 2.0 scheme which would be launched this fiscal only.

He said that under the new tariff policy, the discoms would have to pay a surcharge for delayed payment, which would be equal to the commercial rate of interest.

Elaborating further he said, "After the rollout of tariff policy and UDAY 2.0 scheme, if a discom would not take steps to reduce losses, then Government of India would not give any grant or loan."

About empowering the consumer in the new tariff policy he said, "We have recognised consumer rights in the policy. Earlier those were not recognised. We are saying that it is a service. One thing we are saying that discoms would be penalised if they do load shedding."

On the under-recovery of cost of supply of power, he said, "Discoms cannot put the burden of their inefficiencies on consumers. Earlier they used to charge under-recovered power supply cost to other consumers. Around 70 percent consumers used to pay for 100 percent consumers. This is injustice."

He further said, "Now we have given an option of 15 percent. Now we would allow recovery of up to 15 percent under-recovered power supply cost from the tariff of other consumers. If your loss is beyond 15 percent then discom or state government would pay for that. This is the consumers' right."

Under the new tariff policy, a provision for standards of service which would provide timeline for various services like time period for replacing a burnt transformer etc.

Also read: Discoms Won’t Get Power If They Don’t Provide Letters Of Credit To Generators

Singh said that the tariff policy provides that the Central Electricity Authority would set standards of service and there would be a penalty for not meeting those standards.

On the UDAY 2.0, he said, "We are coming out with a project under which we would reduce losses of discoms. We will be giving funds to discoms to reduce losses by taking steps like opening new police stations for power theft."

He also said that UDAY 2.0 provides that the funds from the Centre would only be released if the discom takes steps to reduce losses.

Also read: Discom Debt To Rise To Pre-UDAY Level This Fiscal, Says Crisil

He said, "They would not get any grant. They would also not get loans from PFC and REC. These are incentives and disincentives to reduce losses. You may call it UDAY 2.0. It is aimed at reducing losses of discoms and strengthening the distribution system. We want to roll this out this fiscal year."

The Centre in November 2015 had launched the Ujwal Discom Assurance Yojana -UDAY to bring about operational and financial turnaround of debt-laden power distribution companies.

Finance Minister Nirmala Sitharaman in her budget speech in July had said, Our government launched UDAY in 2015 aimed at financial and operational turnaround of DISCOMs. The government is examining the performance of the scheme and it will be further improved.

About bringing investments in the power sector he said, "There should be demand. We have provided in tariff policy that discom would tell the regulator about power demand in their area every year and we have arranged for that supply. The demand would translate into a power purchase agreement and it would bring investment into power generation."

He also said, "Investors would invest in the power sector only when there would be payment for power supplied. We have fixed that by making the opening letter of credit mandatory for getting power supply by discoms from Aug. 1, 2019.

"This would give surety to power gencos about payment of power supply. So there would be demand and payment would be made for power supply. These two issues are fixed now. We are bringing fundamental changes, he said.

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