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Updated: September 25, 2012 10:39 IST

Power tariffs set to go up as debt recast for SEBs cleared

Sujay Mehdudia
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Consumers nationwide should brace themselves for higher electricity tariffs, with the Cabinet Committee on Economic Affairs (CCEA) on Monday approving a Rs. 1.90 lakh crore debt restructuring package for the State Electricity Boards. File photo
The Hindu Consumers nationwide should brace themselves for higher electricity tariffs, with the Cabinet Committee on Economic Affairs (CCEA) on Monday approving a Rs. 1.90 lakh crore debt restructuring package for the State Electricity Boards. File photo

Consumers nationwide should brace themselves for higher electricity tariffs, with the Cabinet Committee on Economic Affairs (CCEA) on Monday approving a Rs. 1.90-lakh crore debt restructuring package for the State Electricity Boards to facilitate a turnaround of the State distribution companies (discoms).

The CCEA, which met under the leadership of the Prime Minister, approved the package that will force the distribution companies, which are in the red, to begin a fresh round of tariff increase.

“The restructuring by lenders is subject to certain steps to be taken by the State government/discoms and their commitment to fulfil mandatory conditions aimed at bridging the gap between the average cost of supply and the average revenue realised to restore the viability of the sector,” says a Cabinet note.

In other words, it will be mandatory for the State governments or distribution companies to revise their tariffs regularly to avail themselves of the package.

“For financing operational losses and interest for the first three years on a diminishing scale, a separate arrangement will be worked out in respect of focus States such as Rajasthan, Tamil Nadu, Haryana and Uttar Pradesh after due consultations with the States concerned and the Ministry of Power,” the note states.

The scheme provides for 50 per cent of the outstanding short-term liabilities as of March 31, 2012 to be taken over by the States governments. This shall be first converted into bonds to be issued by the distributing companies to lenders and guaranteed by the State governments.

The State government will take over the liability during the next 2-5 years by issuing special securities in favour of the lenders in phases, keeping in view the fiscal space available till the entire loan is taken over. The State governments will also provide distribution companies full support in repayment of interest and principal. The rest of the short-term liabilities will be rescheduled by the lenders and serviced by the distribution companies with a three-year moratorium on principal.

The State governments will convert all loans into equity or defer their recovery, along with interest, until the loans rescheduled by banks/financial institutions are fully repaid. The State governments shall pay by November 2012 all their outstanding energy bills as on March 31, 2012, and the utilities shall give a certificate to this effect by December 31.

Furthermore, a road map for involving the private sector in the State distribution sector through franchisee arrangements or any other mode of private participation will be prepared within a year by distribution companies and submitted to the Central Electricity Authority (CEA) for approval.

The tariff order for 2012-13 will have to be notified before the financial restructuring package is approved, and for subsequent years, it should be notified by April 30 of each financial year as per the model tariff regulation. The State Electricity Regulatory Commission (SERC) shall be requested to allow revised tariff with effect from April 1 each year so that the impact of tariff revision is fully realised during the financial year.

The scheme also makes prepaid meters mandatory by March 31, 2013 for all government consumers and large consumers (1 MW and above), in whose cases defaults have occurred.

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Why should those who use luxury equipment like refrigerators and air-conditioners pay at the
same rate for electricity as those who don't? A stupid question this perhaps in Manmohan
Singh's India!

from:  K.Vijayakumar
Posted on: Sep 25, 2012 at 17:24 IST

Fine, the Government which is headed by world's noted economist and another intellectual as finance minister is making mockery of things everyday. These two men never care about the common man, Since there is no alternative to these peoples, they just thought we can do anything for the remaining 2 years, whatever happens after that is nothing to them. Truly speaking these two people should ashamed of themselves for lettting this country to this kind of situation.

from:  Thiravidamani
Posted on: Sep 25, 2012 at 12:43 IST

Centre really at its best...there are really leaving no room for the country to not hate them.....

from:  Indian
Posted on: Sep 25, 2012 at 10:10 IST

so let me get this a bit more clear...
all in all.....public/citizens may more (yet another inflation in just another sector) for the fiscal deficit that the government is suffering?? or is it the private firms who are getting their hands cleaned by making public may more to clear the dept???

from:  Indian
Posted on: Sep 25, 2012 at 10:07 IST

The government should clear one more bill to provide the poison to poor
people or to give subsidy for poison. The government is working only for
raising and not reducing the costs as well as scams

from:  Balaji
Posted on: Sep 25, 2012 at 09:55 IST

Accoding to me, one of the most importnat factor which contributes to
losses of State Electricity borad is ineffecient way of collecting
bill payments and corruption among meter reading persons.

Why should a common man who is paying his bill regularly bear the
burden of government's inefficiency. There have been cases when
politically strong people's bills are due for years and accounts for
crores of rupees. Also, firms and rich people whose monthly bills
comes in lakhs of rupees settle down the bill payments with meter
reading persons. If these issue are not adressed, this problem cannot
be resolved even temporarily.

Also, price rise has one more implicaton. It will lead to further
increase in corruption. People who are paying honestly till date, will
make under the table payments to meter reading person and avoid the
extra bill payments.

from:  Naveen Kumar
Posted on: Sep 25, 2012 at 09:38 IST

Raising the tarrif should not be the only step.Create efficient use of the resources.Inefficient use is the main cause.Fatty salaries,corrupt contracts,idle resources,better use of technology are the ways.

from:  vijay walia
Posted on: Sep 25, 2012 at 07:02 IST

Our PM Manmohanji wants to help western companies dealing with atomic energy to lift them from red in view of aversion of advanced nation avoiding nuclear power.So we have to pay.

from:  atis
Posted on: Sep 25, 2012 at 06:39 IST

Looks like all the prices are going high! richer are becoming richer
and poor is suffering all the burden. The politicians are sucking the
money of the Citizens and increasing the prices of all commodities
with deteriorating facilities. I guess it time for a civil war in
India, all the royal politician families are to be removed and thrown
out.
New politicians without any experience in politics or history of crime
are to be elected.
Just hoping a day will come when i find clean govt. offices with clean
people.
Jai Hind!!!!

from:  Srikar
Posted on: Sep 25, 2012 at 04:18 IST

It is criminal to tax the consumer when the power sector is wasting
power to the extent of 25% as loss due to inefficient energy management.
India's power sector is described as a leaking bucket.
Power loss due to theft and transmission losses are heavy and private
estimates show around 40% to 50% , where as World bank pitches the loss
around 25%.
Why should the consumer pay for the inefficiency and rampant corruption
of the over staffed power sector

from:  Krishnan
Posted on: Sep 25, 2012 at 02:46 IST

Finally tariffs are going up. We have been enjoying cheap electricity for far too long. The aam aadmi needs to pay his fair share of bills rather than ask the rich to constantly subsidize them. But, the government should also crackdown on those stealing electricity - politicians must not allow people living in slums to get free electricity in order to avoid angering them and losing their vote during elections. This system results in distribution companies selling low while buying high, thus ratching up debts that make them insolvent and prevent them from spending money on essential things like upgrading distribution lines to make them more efficient.

from:  Anuj Shah
Posted on: Sep 25, 2012 at 00:53 IST

So incomes have mostly remained stagnant over the years but prices of
nearly everything are rising. This apparently is good for the "economy",
but what about ordinary Indian people like me and my fellow commentors
who are middle class people etc and do not get subsidized merchandise
and lots and lots or perks like Dr Manmohan Singh and Montek?

from:  Aritra Gupta
Posted on: Sep 24, 2012 at 23:23 IST
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