The Ministry of Power has issued a notification directing the state electricity regulatory commissions (SERCs) to issue tariff orders for the financial year (FY) 2020-21 at the earliest. The Ministry has asked the SERCs to strictly comply with the directions of the Appellate Tribunal for Electricity (APTEL) and issue tariff orders, adhering to the provisions of the Electricity Act, 2003.
The Ministry stated that the step was necessary to ensure the financial health of the distribution companies (DISCOMs) in the states. The Ministry further asked the states to update the status of the tariff orders.
“Some of the SERCs are issuing tariff orders regularly in every financial year, whereas, some of the other SERCs are not strictly adhering to the provisions of the Act for timely issuance of the tariff orders,” the Ministry noted.
Earlier, the APTEL had issued an order in 2011 on the tariff revision. In its order, APTEL had issued directions to the state commissions for ensuring regular and timely revision of tariffs, including truing up of tariffs, non-creation of fresh regulatory assets, allowing carrying cost of the past regulatory assets, and a mechanism for fuel and power purchase cost agreement to be put in place.
In 2019, APTEL had directed the state and joint electricity regulatory commissions to explain the delay in the revision of the tariff, lack of payments to the DISCOMs, and gaps in revenue over the last three fiscal years. This was in response to the 2011 order.
Further, the latest notification stated that power distribution was a crucial element of the entire electricity value-chain and the sustainability of the entire power sector was critically dependent on the stability and growth of the power distribution companies.
According to the notification, some states that have issued the tariff orders for the FY 2020-21 included Andhra Pradesh, Assam, Bihar, Gujarat, Haryana, Odisha, Mizoram, and Sikkim, among others. Manipur and Puducherry issued the tariff orders in April this year.
The draft proposal for the amendment of the Electricity Act 2003 by the Ministry of Power also points that the tariff determined by the state distribution companies is not reflective of the actual cost, which is the leading cause of their weak financial health. The amendment also emphasizes that the tariff has to reflect the cost of the supply of electricity, and cross-subsidies and reduce the surcharges levied on industrial consumers.
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Rakesh is a staff reporter at Mercom India. Prior to joining Mercom, he worked in many roles as a business correspondent, assistant editor, senior content writer, and sub-editor with bcfocus.com, CIOReview/Silicon India, Verbinden Communication, and Bangalore Bias. Rakesh holds a Bachelor’s degree in English from Indira Gandhi National Open University (IGNOU). More articles from Rakesh Ranjan.