State governments should release subsidies to discoms
Electricity supply in the country is no more a controversial subject or the pain that it was a few decades ago. We got our act together since, and the Central Electricity Authority (CEA) projects an energy surplus of 6.4% for the country in the previous financial year. On the other hand, while huge strides were made in power generation, the distribution side, managed mainly by state-run power distribution companies (discoms), is still in a mess. Consumers, especially in rural areas, continue to suffer extended outages, lousy maintenance and unstable voltage. The two main reasons are: first, there are considerable losses in transmission and distribution; second, tariffs—regulated by political expedience—are often below the cost of buying power from the power generating companies (gencos).
In this scenario, government subsidies for the discoms are a crucial lifeline. Unfortunately, state governments have not released the promised subsidies. They have not paid their power bills like other consumers in recent months, creating a whopping unpaid backlog of Rs 1.4 lakh crore. This was revealed at a recent presentation to a meeting of state chief secretaries. Significantly, the total dues discoms owe to power generation units are about Rs 1.2 lakh crore. This means if the state governments release the funds due to the discoms, the latter would, in fact, be in surplus.
The slowdown of commercial and manufacturing activity during Covid only adds to the power distribution companies’ woes. Demand for power fell for the first time in 35 years, creating additional losses of Rs 16,000 crore per month. The long-term solution is to address this delicate balance between power generators, distribution companies and the consumer. The privatisation of distribution, in many cases, is successful with better technical efficiency and fewer leakages. Delhi, for instance, has reduced its transmission and delivery losses from a stupendous 53% to just 8% after privatisation. In the short-term, though, the bail-outs were announced by the Centre (Rs 1.35 lakh crore). And monies state governments owe must be speedily released to ensure distribution companies don’t make life even more difficult for consumers.