Government Calls on States to Enhance Financial Stability of Power Utilities
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Synopsis
During a meeting in Lucknow, Union Minister Yesso Naik urged states to adopt measures aimed at improving the financial viability of power utilities. Key discussions included financial restructuring, cost-reflective tariffs, and the implementation of innovative technologies to support the sector's sustainability.
Key Takeaways
- Need for financial restructuring of power utilities.
- Emphasis on cost-reflective tariffs for sustainability.
- Importance of AI and digital innovations in power sector.
- Proposal for a new scheme similar to UDAY.
- Discussion on reducing outstanding debts of DISCOMs.
Lucknow, March 30 (NationPress) Union Minister of State for Power Yesso Naik emphasized the importance of implementing strategies designed to assist state power utilities in enhancing their financial health.
During a meeting with the group of ministers from various states, Minister Naik pointed out the necessity of creating a framework for the financial restructuring of distribution utility liabilities, reducing interest burdens, developing storage solutions, and providing daytime power supply for agriculture to decrease overall power purchase expenses and alleviate subsidy pressures, as detailed in a statement released post-meeting.
The Minister also stressed the significance of adopting AI and digital innovations, alongside ensuring cost-reflective tariffs for the power sector's financial stability. He indicated that these initiatives would bolster the financial sustainability of utilities. Moreover, he called for a program akin to the Ujwal DISCOM Assurance Yojana (UDAY), which aims to financially revitalize electricity distribution companies (DISCOMS) across India.
In attendance were the Energy Ministers of Uttar Pradesh, Andhra Pradesh, Madhya Pradesh, and Maharashtra, along with high-ranking officials from both Central and State governments, as well as representatives from State Power Utilities, Power Finance Corporation (PFC) Ltd, and REC Ltd. TATA Power Distribution from Odisha, as a special invitee, shared their best practices and the journey towards making their DISCOMs profitable.
The participating states shared insights regarding their DISCOMs and provided valuable recommendations to enhance their financial status. States including Uttar Pradesh, Madhya Pradesh, Andhra Pradesh, Maharashtra, and Tamil Nadu presented on the topic.
The meeting delved into an Action Plan outlining strategies to mitigate the outstanding debts and losses of distribution utilities, aiming to guide them towards profitability.
Attention was given to the review of regulators' performance in determining tariffs. The meeting proposed support from the Government of India for state privatization initiatives, and discussed the need for regulators to stay updated on recent advancements in the sector, including current RE integration levels, capacity building requirements, and operation and maintenance (O&M) costs when setting tariffs.
The chronic issue of delayed payments of government department dues and subsidies is forcing DISCOMs to seek working capital loans, which are not reflected in tariffs. Additionally, there are delays in adjusting Fuel and Power Purchase Cost Adjustments in tariffs, necessitating working capital that is overlooked in the Utilities' Annual Revenue Requirements. To prevent future tariff shocks, it was proposed to link tariffs to annual inflation-based adjustments.
The Group of Ministers reaffirmed its commitment and determination to implement necessary measures to enhance the financial viability of DISCOMs.
Minister Naik also highlighted the need for states to exhibit stronger political will and commitment to make the power sector viable, urging member states to act on the ideas discussed during the meeting.
It was also unanimously agreed to convene the next meeting of the Group of Ministers in Andhra Pradesh in April.
