CERC urges government to interlink bail-out package to DISCOMS with the improvement in their performance

Press Release

Ahmedabad, October 8, 2012

Taking serious note of frequent bail-out packages offered by the Central Government to the power distribution companies (DISCOM) in the country, Consumer Education and Research Centre (CERC), a nationally renowned organization working for consumers’ interest, has made a strong representation before the union ministry of power to interlink the package benefits with the performance of the respective DISCOM. Apart from that, it has also come up with some valuable suggestions for State Electricity Distribution Responsibility Bill, which can have a far-reaching and positive impact on the overall performance of the segment.

In a letter addressed to Shri Veerappa Moily, Union Minister for Power, Government of India, CERC has highlighted some disturbing factors, which are mainly responsible for the poor performance of the DISCOMs. These include free or heavily subsidized power supply to agriculture, huge amount of theft in electricity, nonfunctioning of meters at the premises of consumers, rampant corruption prevailing in distribution companies, huge transmission & distribution losses prevailing at 24.12% against 14% as recommended by Rajadhyaksh Committee and interference of state governments in the functioning of SERCs, which prevent revision in tariff.

Suggesting that heavy loss-making DISCOMs should be handed over to private companies as distribution franchises, the letter, signed by Shri K.K. Bajaj, Chief General Manager (Hon.), CERC, further says that the recent package of Rs. 1.9 Lakh crore, approved by the government will put additional burden on people of India, as this will be ultimately financed by tax-payers’ money.

CERC therefore requests Ministry of Power to direct Central Electricity Authority to monitor performance of DISCOMs. If the desired performance is not achieved every year the package amount should be discontinued till the target is achieved by DISCOM. It is therefore requested that bail-out package should be interlinked with the performance of Distribution companies,” suggests the letter.

CERC has also forwarded some suggestions for State Electricity Distribution Responsibility Bill. These include reduction in distribution losses at least by 2% ever year, implementation of 100% metering for all consumers including agriculture sector, minimum Rs. 1.50 per unit tariff for agriculture sector, reduction of gap between revenue generation and cost of supply, billing and collection efficiency of more than above 99%, reduction in manpower cost, purchase of power in merit order as directed by State Electricity Regulatory Commission, plant load factor of more than 80% at state generating companies for the sake of cheaper power supply to state DISCOMs, strict adherence to regulations notified by SERCs by DISCOMS and continuous interaction with consumer organizations to protect interests of consumers.

The letter also expresses concerns about the poor financial condition of state electricity distribution companies. “The accumulated losses have crossed Rs. 2 lakh crore after implementation of Electricity Act in 2003. All State Electricity Boards were unbundled with effect from 1st April 2005 barring few. The states like Gujarat and Andhra Pradesh have performed well and improved their financial condition with better operational efficiency,” it says.

CERC feels that role of State Electricity Regulatory Commission is very important to improve the financial & technical performance of state utilities. It is shocking that out of 22 states only two states have performed well during last decade after enforcement of Electricity Act. CERC has been actively associated with Gujarat Electricity Regulatory Commission and works actively to protect the interests of Consumers first and utility later. Increase in tariff every year is not the solution as mandated by Ministry of Power. Nobody is bothered about the improvement of technical performance of the Electricity companies. The letter also points towards the lack of accountability for poor technical & financial performance of DISCOMs, urging the concerned authorities to initiate necessary action.

For further information please contact

Ms. Pritee Shah (O) 079 -27489945/46

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