Faced with deteriorating health of power distribution companies, as many as 24 states have revised their electricity tariffs in the past 18 months, according to a report.
Low tariff regime has been mainly blamed for the poor financial conditions of power distribution companies (discoms), a scenario that has raised concerns of default in the financial system.
Brokerage firm Motilal Oswal said in a recent report said that discoms have set the ball rolling in favour of disciplined efforts to manage cost, file tariff petition and tariff hikes.
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“During past 18 months, 24 states have revised tariff... We continue to believe that FY 12 was the tipping point in terms of the deterioration in SEB finances, and things have started improving,” it said.
The improved situation is primarily on account of higher tariffs.
The latest state to hike the power tariffs is Tamil Nadu, where the rates have been increased 37 per cent.
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Other states that have raised power tariffs in recent times include Bihar, Rajasthan, Madhya Pradesh, Punjab and Andhra Pradesh.
Late last year, the Shunglu Committee on Financial Position of Distribution Utilities suggested a slew of measures such as setting of a special purpose vehicle to absorb losses of discoms.
The net loss of 15 discoms — which account for over 90 per cent of country’s power consumption — after subsidies was Rs 27,000 crore for the year ended March 31, 2010, the report had said.
The Appellate Tribunal of Electricity (ATE) recently asked state regulators to ensure time and cost-reflective tariff determination.
Last month, rating agency ICRA pegged the losses of discoms — before accounting for government subsidy — at Rs 80,000 crore for the 2011-12 fiscal. Estimates were based on a study of power distribution companies (discoms) functioning in 11 states.