This Article is From Feb 19, 2013

Tariff hike should be the last resort: Jyotiraditya Scindia

Tariff hike should be the last resort: Jyotiraditya Scindia
Power Minister Jyotiraditya Scindia today said that a power tariff hike by discoms to ride out the losses they are incurring should be the last resort they should be looking at.

However, Mr Scindia was quick to add that "right now, the condition of power distribution companies (discoms) is so bad that tariff hikes look to be the only option for them to manage their debts, which are pegged at Rs 1.9 lakh crore." In the long term, cutting down on the aggregate transmission and commercial (AT&C) losses can do the trick for the discoms, he said.

Mr. Scindia completed 100 days in the Ministry as Minister of State (MoS) with Independent Charge after the Cabinet reshuffle in October last year. Addressing the press, Mr. Scindia said that Aggregate Technical and Commercial (AT&C) losses in India are more than 25 per cent of the power generated. "This is a bigger concern," he said.

Mr. Scindia further added that India has the capacity to generate of 2.2 lakh megawatts (MW) of power. "However, with plant load factor of 70-75 per cent, production availability anyway gets reduced to about 1.5 lakh MW." Adding to this the AT&C losses, what is available is only about 1.2 lakh MW, he said, adding that every unit of power saved is power produced.

"In this view, cutting down on AT&C losses should be the first priority before any decision on power tariff hike," said Mr Scindia. Meanwhile, the Minister said that the Cabinet-approved Financial Restructuring Package (FRP) worth Rs.1.9 lakh crore for state-owned discoms is in the process of being implemented.

Mr Scindia said the "last mile" details are being worked out by the Finance Ministry and some concrete decisions can be seen in the coming weeks.

He added that all the six to seven worst-affected states are now on board for the FRP. Mr Scindia also highlighted the fact that all the sub-segments - generation, transmission, distribution and last-mile connectivity - need to be strengthened.

He said the government has put in place a mechanism to strengthen the grid system in India so that the situation that was created after the blackout in July last year doesn't happen again.

"The process has started to grant full independence and autonomy to POSOCO (Power Operation System Company, a wholly-owned subsidiary of PowerGrid)," said Mr Scindia, adding that independence to POSOCO will ensure accountability, while autonomy will empower the department to implement grid discipline among the states so that overdrawal doesn't happen, something which generally jeopardises the grid stability.

On the gas supply situation, Mr Scindia showed concern about the shortage that the country is facing. The minister said the committed quantity is not available in the country and "9,000 MW gas-based capacity is stranded."

On NDTV's query to why the power firms cannot import liquefied natural gas (LNG), Mr Scindia said LNG import is expensive and the power tariff can go up exponentially. He, however, added that LNG can be used to replace the diesel-based production to supply for the peak power demand which anyway is expensive.

Speaking on the power sector, Mr Scindia said: "India's investment cycle is very much pre-determined by its power cycle. Close to about 30-40 per cent of the growth of industries comes clearly from the power sector. To get the Indian economic juggernaut rolling, we need to re-energise and re-focus the investment in power sector."

The minister has formed an advisory body comprising CEOs and promoters of private sector power firms along with CEOs of financial institutions. SBI chairman Pratip Chaudhuri, ICICI Bank MD Chanda Kochhar, Tata Power chairman Cyrus Mistry and Reliance Power's Anil Ambani are some of the members of the advisory body.

Mr. Scindia had the first meeting of the advisory board on Tuesday, where the issue of fuel linkage and stranded projects was discussed. The minister sounded optimistic on the issue of fuel supply agreements (FSAs).

He highlighted that FSAs for 21,000 MW have already been signed in the last 100 days. The second meeting of the advisory group is likely to happen in a fortnight.