Subsidy dependence of 16 states discoms may rise steeply

The subsidy burden for distribution utilities of 16 states is estimated at Rs 72,000 crore, 17% higher than the previous financial year, due to higher costs and cheaper tariff for the farm sector, said ICRABSE -0.59 % in a recent note. The note states that state electricity regulators in 16 out of the 29 states have issued tariff orders for the current fiscal so far, attributing the delay partly to the recently-held Lok Sabha elections. 

The rating agency noted that subsidy dependence for utilities in Maharashtra is likely to increase sharply by about 55% on a year-on-year basis in FY15 as a result of tariff subsidy of 20% announced by the state government, and also for Jammu & Kashmir where the subsidy burden is projected to rise by 51% due to continuous support for funding the high transmission and distribution losses. The subsidy for utilities in other states is estimated to rise by 8-20% in 2014-15, against 2013-14. 

Tariff increases for 2014-15 have been very modest in Haryana and Karnataka. Out of these 16 states where tariff orders were issued, regulators in Arunachal Pradesh, Bihar, Gujarat, Jammu & Kashmir, Odisha, Uttarakhand and Madhya Pradesh have not approved any tariff revision for the distribution utilities, while it declined marginally in Himachal Pradesh as a result of tariff rationalisation. In case of other eight states, tariff revision has been moderate in the range of 5-10%. In Meghalaya, tariff has been raised by 15%.

Meanwhile, actual distribution losses for utilities across most states have remained higher than the loss trajectory approved by the regulator. Among the tariff orders issued so far, a wide variation, ranging between 5-15%, is observed between actual and allowed distribution loss levels in case of utilities in Odisha, Haryana and Uttarakhand. Under these circumstances, the ability of utilities to quickly reduce losses so as to approach the approved loss  ..


Source: Economic Times


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