Half-hearted reforms won’t help salvage discoms: RK Singh

Power minister RK Singh on Monday called for immediate correction of wrong policies like continuing state subsidies for large sections of electricity consumers and billing-and-collection inefficiencies which keep state distribution companies (discoms) in poor financial health.

Stressing the need for robust and sustainable revenue stream for discoms which have been given many bailout packages, the minister noted that half-hearted reforms under Electricity Act 2003 was also to blame for the current state of affairs. Distribution companies are still to be entirely removed from the clutches of the state governments, so they are not able to take commercial decisions in a free manner.

Speaking at a Ficci event, the minister said that most of the state discoms are loss-making in contrast with the private discoms and franchisee companies where the AT&C losses are less than 10% and all are profitable.

The state discoms are not able to pay for power and resort to load shedding. They fail to maintain the system. The trend is going on for decades and every six to seven years the central government injects funds to strengthen the distribution system, but it doesn’t fully resolves the problem.

The minister noted that if lack of efficiency in billing and collection is set right, every discom will become profitable as it will include billing of electricity that is lost due to theft. “We have suggested usage of pre-paid meters, which stops any human interference. But it is not happening in rural areas and North India. One major reason for that is drop in number of meter readers who have not been recruited by state discoms after the readers have retired. The drill of central government of recruiting meter readers is lost,” the minister said.

“Even I will not be able to pay 4-5 bills at a time,” he said. The minister also stated that there is nothing wrong in giving free electricity to customers by state government but they should pay for the electricity as it is not free. The coal and freight companies have to be paid; even the water for power generation has to be paid.

He also noted that the state regulators are appointed by discoms and are not at arm’s length. They are acting on behest of the state government. Especially, when the tariffs have to be increased there is pressure on regulators to keep the tariffs low, which leads to losses. He cited an example of a state where the tariffs have not increased for three years and the state is in financial trouble.

The minister said that he has been informed that some generation companies have been conniving with states governments and indicating through regulators that they have received the letter of credit just to continue their supply of power uninterrupted as switching off and restarting a power plant is very difficult.

“But in a relationship one has to be disciplined. If the letter of credit is not received the power should be stopped immediately to maintain transparency in the system and also to improve the overall health of the discoms,” Singh said.