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The election campaign has struck a big blow to the power sector as many state distribution companies have either sought lower tariffs or not demanded a hike despite huge revenue gaps, putting at risk the Centre's bailout package for utilities with total losses of INR 2 lakh crore. For consumers, this is no cause to cheer as they are heading for a tariff shock next year as utilities will scramble to offset losses they will accumulate in the election year; and for power producers, financial weakness of distribution companies - the vital link between generating stations and customers - remains a big hurdle, industry observers say.

Discoms in Gujarat, Madhya Pradesh, Odisha, West Bengal and Delhi have not sought any increase in tariff, while the regulator in Bihar has disallowed higher rates for the fiscal year that begins in April. As per the Centre's debt recast plan to these companies and an order of the Appellate Tribunal of Electricity, tariff determination exercise for a financial year should be completed before the fiscal year begins.

"All these measures definitely take us closer to one more bail out package," said Kameswara Rao, energy, utilities, and mining leader at PricewaterhouseCoopers.
Former power secretary P Uma Shankar said distribution companies not filing tariff petitions before elections was a "blessing in disguise" as a delay of 3-4 months may not hurt the finances of the discom but an inadequate increase would pinch. Utilities of Shivraj Singh Chouhan-ruled Madhya Pradesh have projected a revenue gap of INR 1,267 crore but proposed to maintain last year's average tariff. "Discoms believe that they will further improve their operational efficiency by way of technical and commercial loss reduction as a result of the various capital investments undertaken in recent years," petitions filed with state regulator said.
The companies promised efficient management of surplus energy to recover maximum revenue through competitive sale rates. The discoms said any revenue gap would be recovered next year. The collective revenue gap of Naveen Patnaik's Odisha power distribution companies is estimated to be around INR 2,025 crore and those of Narendra Modi's four state-owned companies at about INR 1,685 crore.

Delhi's two BSES electricity distribution companies have also refused price hike. The companies have proposed to recover the revenue gap during the financial year through quarterly fuel cost adjustment. Power distribution utilities of some states like Andhra Pradesh, Karnataka have, however, sought price hikes too.

The Union government had in September 2012 approved a bailout package for state power distribution companies that had accumulated losses of over INR 1.9 lakh crore. The bailout was based on commitments by distribution utilities and state governments to improve the operational performance of utilities and reduce distribution losses.

Source-On Request